If the Itan agreement is terminated, will the development fee be refunded?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
- 10. EFFECT OF TERMINATION. Termination of this Agreement ends all your rights and development obligations under this Agreement, including your interests in the Development Territory and right to sign new Franchise Agreements or open new Salons. We will not refund any portion of the development fee.
- 6. DEVELOPMENT FEE. Upon execution of this Agreement, you must pay us a development fee (the "Development Fee") in the amount set forth in Part B of ATTACHMENT "A". The Development Fee is calculated as the sum of the initial franchise fees applicable to all Required Salons listed in the Development Schedule. The Development Fee, and the initial franchise fees for the Required Salons comprised by the Development Fee, are fully earned and nonrefundable upon receipt.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, if the Area Development Agreement is terminated, Itan will not refund any portion of the development fee. This policy applies regardless of whether the termination is initiated by Itan due to the franchisee's default, or by mutual agreement between Itan and the franchisee. This means that the development fee is nonrefundable under any circumstances once paid.
This policy has significant financial implications for prospective Itan area developers. The development fee, which covers the initial franchise fees for all required salons, is fully earned and nonrefundable upon receipt. Therefore, if a franchisee fails to meet the development schedule or otherwise breaches the agreement, leading to termination, they will forfeit the entire development fee. This represents a substantial financial risk, especially considering the development fee is calculated as the sum of initial franchise fees for all required salons.
It is important for prospective Itan franchisees to carefully consider their ability to meet the development obligations outlined in the agreement. The Development Schedule is detailed in Section 4.1 and Part C of ATTACHMENT "A". Franchisees should also be aware that the development fee is deemed to include the initial franchise fee for all Required Salons referred to in the Development Schedule. Given the nonrefundable nature of the development fee, prospective franchisees should conduct thorough due diligence and seek professional advice before entering into an Area Development Agreement with Itan.