What is the Spray Net franchisee's obligation upon execution of the franchise agreement regarding the initial franchise fee?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
- Effective Date. This Rider is effective as of the Effective Date.
Agreed to by:
SPRAY-NET INC. ©2025 Spray-Net Inc.
SPRAY-NET INC. MARYLAND ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
The following is added to Item 5:
Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement. In addition, all development fees and initial payments by area developers shall be deferred until the first franchise under the multi-unit development agreement opens.
The following is added to Item 17:
The general release required as a condition of renewal, sale, and/or assignment/transfer shall not apply to any liability under the Maryland Franchise Registration and Disclosure Law.
Source: Item 23 — RECEIPTS (FDD pages 75–219)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, the initial fees and payments owed by franchisees may be deferred depending on the state where the franchise is located. In Maryland, Minnesota, and Virginia, the respective securities commissioners or departments of commerce have required a financial assurance based on Spray Net's financial condition.
This financial assurance mandates that all initial fees and payments owed by Spray Net franchisees are deferred until Spray Net completes its pre-opening obligations under the franchise agreement. This deferral also applies to development fees and initial payments by area developers in Maryland, where these fees are deferred until the first franchise under the multi-unit development agreement opens.
In North Dakota, the North Dakota Securities Commissioner has also required a financial assurance, leading to the deferral of all initial fees and payments until Spray Net fulfills its pre-opening obligations. This means that in these states, a new Spray Net franchisee will not be required to pay the initial franchise fee upon signing the franchise agreement. Instead, the payment is delayed until Spray Net has met its obligations to help the franchisee get started.
This deferral of fees is a significant benefit for franchisees in these states, as it reduces the upfront financial burden and aligns the payment of fees with the franchisor's performance in providing initial support and services. However, it is important to note that this deferral is contingent upon Spray Net's financial condition and the specific requirements of the regulatory bodies in each state. Franchisees in other states may have different payment obligations as outlined in the franchise agreement.