Under what conditions is the Initial Franchise Fee for Stretch Zone deferred?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
ITEM 5 – Initial Fees is amended to add the following applicable language at the end of the applicable section of Item 5:
INITIAL FRANCHISE FEE
The Initial Franchise Fee will be deferred and is not payable to us until we have complied with all of our pre-opening obligations to you under the Franchise Agreement and you are open for business.
DEVELOPMENT FEE
The Development Fee will be deferred and is not payable to us until we have complied with all of our pre-opening obligations to you under the Area Development Agreement and the Franchise Agreement for the 1st Franchise Business.
- ITEM 17 of the Franchise Disclosure Document is amended by the addition of the following language to the original language:
Upon termination or refusal to renew the Franchise Business, we will compensate you for the fair market value your inventory, supplies, equipment and furnishings purchased from us or a supplier we designated. We will not compensate you for your personalized materials that have no value to us. If we refuse to renew your Franchise Business because we desire to convert your Franchise Business to a Company-Owned Unit, we, in addition to the remedies provided in this paragraph, will compensate you for the loss of goodwill. We may deduct from this compensation reasonable costs incurred in removing, transporting and disposing of your inventory, supplies, equipment, and furnishings, and may offset from this compensation any moneys due us.
ILLINOIS ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT
- All initial fees are deferred until we have performed all of pre-opening obligations and you are open for business. The Illinois Attorney General's Office imposed this deferral requirement due to our financial condition.
ITEM 5 – Initial Fees is amended to add the following applicable language at the end of the applicable section of Item 5:
INITIAL FRANCHISE FEE
The Initial Franchise Fee will be deferred and is not payable to us until we have complied with all of our pre-opening obligations to you under the Franchise Agreement and you are open for business.
Source: Item 5 — Initial Fees is amended to add the following applicable language at the end of the applicable section of Item 5: (FDD pages 89–91)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, the Initial Franchise Fee is deferred and not payable until Stretch Zone has met all pre-opening obligations outlined in the Franchise Agreement and the franchisee is open for business. This means a new Stretch Zone franchisee will not have to pay the initial franchise fee upfront. Instead, the fee is due after Stretch Zone has fulfilled its responsibilities in helping the franchisee get the business ready to open.
This deferral of the Initial Franchise Fee provides a significant benefit to new Stretch Zone franchisees. It reduces the initial financial burden and allows the franchisee to allocate those funds to other startup costs, such as leasehold improvements, equipment, and initial marketing expenses. This can be particularly helpful for franchisees who are financing their new business, as it reduces the amount of capital they need to borrow upfront.
Furthermore, the Illinois Addendum to the Franchise Disclosure Document states that all initial fees are deferred until Stretch Zone has performed all pre-opening obligations and the franchisee is open for business. The Illinois Attorney General's Office imposed this deferral requirement due to Stretch Zone's financial condition. This provides an additional layer of protection for franchisees in Illinois, ensuring that they do not pay any initial fees until Stretch Zone has demonstrated its ability to support the opening of their business.
This deferral of fees is not typical in the franchise industry, as most franchisors require the initial franchise fee to be paid upfront. The fact that Stretch Zone defers these fees may indicate a higher level of confidence in their ability to support new franchisees and a willingness to share some of the initial financial risk. However, prospective franchisees should still carefully review the Franchise Agreement and conduct thorough due diligence to understand all of the terms and conditions of the franchise opportunity.