What does 'Consigned Product' mean in the context of an Aerus franchise?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
- N. "Consigned Product" means any of the Products consigned by Company or any of its Affiliates for sale by or through the Franchised Business; except that "Consigned Products" does not include spare parts and supplies, which shall not be consigned to Franchisee.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, a "Consigned Product" refers to specific products provided by Aerus or its affiliates to the franchisee for sale through the franchised business. However, this definition explicitly excludes spare parts and supplies, which are not consigned to the franchisee. This arrangement means Aerus retains ownership of these consigned products until they are sold to the end customer.
This consignment arrangement has several implications for a prospective Aerus franchisee. Because Aerus retains title to the consigned products, the franchisee does not purchase them upfront. Instead, the franchisee pays Aerus only after the products are sold. This can significantly reduce the initial capital investment required to start the franchise, as the franchisee does not need to finance the inventory.
However, the franchisee is responsible for the proceeds arising from the sale or return of the consigned products. Aerus maintains a security interest in the consigned products and all proceeds from their sale to ensure payment. The franchisee is also responsible for the costs associated with filing or recording the Consigned Products Security Agreement and any related financing statements. This arrangement protects Aerus's interest in the consigned products and ensures they are prioritized over other creditors of the franchisee.