A Certificate of Deposit is another type of financial assurance with the caveat that it is not available in all states that may require some form of financial assurance.
As an example, within Illinois: Posting a Certificate of Deposit for each franchise intended to be sold in Illinois (Section 200.506 of the Rules); each CD posted must be in the amount of the initial franchise fee. The CD requirement must be disclosed in Item 5, or on each Illinois addendum, and in the appropriate section of the Agreement. Item 5 or each Illinois addendum must also disclose that the Illinois Attorney General’s Office imposed the financial assurance requirement due to Franchisor’s financial condition. If a Development Agreement is being offered, the CD must include the development fee, which cannot be released until the first franchise opens.
Depending on the state, and if Posting a Certificate of Deposit is an option, each state’s details and requirements should be read carefully and followed specifically. Each state might have slightly different details to comply to.