What is the relationship between the Development Fee and the Initial Franchise Fee for a Fly Fitness franchise?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
t and all rights granted by Franchisor under this Agreement shall expire on the date on which Developer successfully and in a timely manner has complied with all of Developer's obligations hereunder and has completed the development obligations in accordance with the Development Schedule.
4. DEVELOPMENT AND FRANCHISE FEES.
- 4.1 Multi-Unit Development Fee. In consideration of the rights granted under this Agreement, Developer shall pay Franchisor a development fee ("Development Fee") equal to Fifty Thousand Dollars ($50,000) for your first Fly Fitness Franchised Business and fifty percent (50%) of the discounted initial franchise fee of Twenty Five Thousand Dollars ($25,000) for each Franchised Business thereafter Developer agrees to develop as set forth on the Mandatory Development Schedule.
- The Development Fee is fully earned at the time this Multi-Unit Development Agreement is signed and is not refundable under any circumstances. Developer shall pay the full amount of the Development Fee to Franchisor upon Developer's execution of this Agreement.
- 4.2 Application of Development Fee. Contemporaneous with the execution of this Agreement, Developer shall execute the initial Franchise Agreement for the first Franchised Business to be established pursuant to the Mandatory Development Schedule. Developer shall receive the applicable credit from the Development Fee, which shall be applied to the Initial Franchise Fee due under the initial Franchise Agreement. Provided that Developer is in compliance with the Mandatory Development Schedule and is not otherwise in breach of this Agreement, upon the execution each of additional Franchise Agreement for a Franchised Business to be developed hereunder, Developer shall receive the applicable credit from the Development Fee, which shall be applied to the Initial Franchise Fee payable pursuant to each such additional Franchise Agreement. Upon Franchisor's approval, Developer may enter into the initial Franchise Agreement or any su
Source: Item 23 — RECEIPT (FDD pages 45–182)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, a developer pays a Development Fee for the right to develop multiple Fly Fitness franchises. The Development Fee is $50,000 for the first Fly Fitness Franchised Business and fifty percent (50%) of the discounted initial franchise fee of $25,000 for each Franchised Business thereafter. This fee is fully earned by Fly Fitness when the Multi-Unit Development Agreement is signed and is non-refundable.
Contemporaneously with the execution of the Multi-Unit Development Agreement, the developer must also execute the initial Franchise Agreement for the first Fly Fitness location. The developer will then receive a credit from the Development Fee, which is applied to the Initial Franchise Fee due under this initial Franchise Agreement. As long as the developer adheres to the Mandatory Development Schedule and isn't in breach of the agreement, they'll receive a credit from the Development Fee upon executing each additional Franchise Agreement; this credit is then applied to the Initial Franchise Fee for each new location.
In essence, the Development Fee acts as a deposit that is then credited towards the Initial Franchise Fees for each Fly Fitness location the developer opens. This incentivizes developers to open multiple locations as planned, while also providing Fly Fitness with upfront capital. It's important to note that the initial Development Fee is non-refundable, so a prospective developer should carefully consider their ability to meet the development schedule before signing the agreement.