What is the purpose of the Development Fee paid to Stretch Zone?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 3.1 of the Area Development Agreement is amended as follows:
SECTION 3.1 DEVELOPMENT FEE
In consideration of the rights granted to you, you will not pay to us the Development Fee until we have complied with all of our pre-opening obligations to you under a Franchise Agreement for the 1st Franchise Business and you are open for business.
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, the Development Fee is described in Section 3.1 of the Area Development Agreement. The purpose of this fee is tied to the rights granted to the developer. Specifically, it is paid "[i]n consideration of the rights granted to you".
However, the Minnesota and Hawaii Addenda to the Area Development Agreement modify the payment terms for the Development Fee. In Minnesota, all Development Fees and initial payments by Developers are deferred until the first Franchise under the Area Development Agreement opens. Similarly, in Hawaii, the Development Fee is not paid until Stretch Zone has complied with all pre-opening obligations under a Franchise Agreement for the first Franchise Business, and the franchisee is open for business.
These addenda indicate that the Development Fee structure can vary by location, potentially offering more favorable terms to developers in certain states by delaying the fee payment until certain milestones are achieved. This could reduce the initial financial burden on the developer and align the fee payment with the progress of the franchise development.