Under what conditions is the Stretch Zone Initial Franchise Fee deferred?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
| (a) and you are open for business. Franchisees currently purchasing a Franchise. | Initial Franchise Fee. You must pay to us an Initial Franchise Fee of $59,500. 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 this Agreement The Initial Franchise Fee is uniform as to all Each of the undersigned acknowledges having read this Addendum, understands and |
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1. Deferral of Initial Fees
The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations. The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business. For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.
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 the 2025 Stretch Zone FDD, the initial franchise fee of $59,500 is deferred under specific conditions. For franchisees purchasing a franchise, the initial fee is not payable until Stretch Zone has fulfilled all pre-opening obligations to the franchisee and the franchisee is open for business. This deferral is applicable to all franchisees currently purchasing a Stretch Zone franchise.
For California franchisees who sign a development agreement, the payment of development and initial fees attributable to a specific unit in the development schedule is deferred until that unit is open. This condition is imposed by the California Department of Financial Protection & Innovation because Stretch Zone has not demonstrated that they are adequately capitalized and/or do not rely on franchise fees to fund their operations.
This deferral of the initial franchise fee can be a significant benefit for new Stretch Zone franchisees, as it reduces the upfront financial burden. It allows franchisees to allocate their initial capital towards other essential startup costs, such as location build-out, equipment, and initial marketing efforts. However, franchisees should be aware of the specific conditions and ensure they understand when the fee becomes payable to avoid any potential financial surprises.