Is defaulting under the consignment agreement considered an 'Event of Default' for Aerus?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
In addition, the following shall be "Events of Default" under this Agreement: (a) Consignee shall default under this Agreement or fail to perform or observe any of the agreements or covenants set forth in this Agreement or fail to pay when due any invoice or invoices covering products subject to this Agreement; (b) Consignee shall be declared to be in default under any material contract, agreement, or instrument to which Consignee is a party with Company or Aerus Franchising, or either of their affiliates or assigns, including without limitation the Franchise Agreement and documents incidental or related thereto, and such default shall continue beyond any applicable cure period; (c) Consignee shall sell, remove, or attempt to sell, remove, or assign Collateral not in the ordinary course of business; (d) any creditor of Consignee shall obtain possession of any Collateral by means including, without limitation, levy, distraint, replevin or self-help.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, defaulting under the consignment agreement is considered an 'Event of Default.' Specifically, if the franchisee (Consignee) defaults under the Consignment Agreement or fails to perform or observe any of the agreements or covenants, it is classified as an 'Event of Default.' This includes failing to pay when due any invoice for products subject to the agreement.
This means that if an Aerus franchisee does not meet the obligations outlined in the Consignment Agreement, Aerus has the right to declare a default. This could occur if the franchisee fails to adhere to the terms of the agreement or does not make timely payments for the consigned products.
Furthermore, the FDD states that if the franchisee is declared to be in default under any material contract, agreement, or instrument with Aerus Franchising, including the Franchise Agreement, and the default continues beyond any applicable cure period, it also constitutes an 'Event of Default.' This highlights the interconnectedness of the agreements and the importance of fulfilling obligations under all contracts with Aerus.
In practical terms, a prospective Aerus franchisee should carefully review the terms of the Consignment Agreement and ensure they understand their obligations regarding payment schedules, performance standards, and other covenants. Failure to comply with these terms could lead to a declaration of default and potential termination of the agreement.