In the state of Washington, what pre-opening obligations must Mrcool satisfy to release initial fees from escrow?
Mrcool Franchise · 2025 FDDAnswer from 2025 FDD Document
-
- Pursuant to The Department of Financial Institutions Securities Division of the State of Washington, RCW 19.100.050 and WAC 460-80-460, all initial fees, including development fees, will be held in escrow to ensure Franchisor has fully satisfied all pre-opening obligations. In lieu of an escrow account, Franchisor will not require or accept payment of any initial franchise fees or development fees until franchisee has (a) received all initial training that it is entitled to under the franchise agreement or offering circular, and (b) is open for business. With respect to development fees, Franchisor will accept payment proportionally to each franchise outlet opened, after all pre-opening obligations have been met. Alternatively, Franchisor may choose to provide a guarantee or acquire a surety bond.
Source: Item 23 — RECEIPTS (FDD pages 55–263)
What This Means (2025 FDD)
According to Mrcool's 2025 Franchise Disclosure Document, the company must meet certain pre-opening obligations before it can access initial fees paid by franchisees in Washington state. Due to the Washington State Franchise Investment Protection Act, Mrcool will hold initial fees, including development fees, in escrow until these obligations are met.
Alternatively, instead of using an escrow account, Mrcool can defer collecting any initial franchise fees or development fees until the franchisee has completed all initial training and is open for business. For development fees, Mrcool can accept payments proportionally as each franchise outlet opens, but only after all pre-opening obligations for that outlet are fulfilled.
Mrcool also has the option to provide a guarantee or acquire a surety bond as another way to ensure these pre-opening obligations are met. This amendment ensures that Mrcool fulfills its commitments to new franchisees before receiving their initial investment, providing a layer of financial protection for the franchisee.