What happens if an Aerus franchisee or any guarantor becomes insolvent?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
- (e) An involuntary petition or complaint shall be filed against Maker or any Guarantor seeking bankruptcy or reorganization of the Maker or such Guarantor or the appointment of a receiver, custodian, trustee, intervenor or liquidator of the Maker or such Guarantor, or of all or substantially all of the assets of the Maker or such Guarantor, and such petition or complaint shall not have been dismissed within forty-five (45) days after the filing thereof; or an order, order for relief, judgment or decree shall be entered by any court of competent jurisdiction or other competent authority approving a petition or complaint seeking reorganization of the Maker or such Guarantor or appointing a receiver, custodian, trustee, intervenor or liquidator of the Maker or such Guarantor, or of all or substantially all of the assets of the Maker or such Guarantor;
- (f) the failure of Maker or any Guarantor to have discharged within a period of ten (10) days after the commencement thereof any attachment, sequestration, execution or similar proceeding against any portion of the property covered by the Security Agreement;
- (g) Payee's liens, mortgages or security interests in any of the collateral for this Note should become unenforceable, or cease to be first priority liens, mortgages or security interests;
- (h) The occurrence of any "default" as defined in the Franchise Agreement; or
- (i) The occurrence of any "default" as defined in any promissory note (other than this Note) or any Security Agreement, Product Sales Agreement or Asset Purchase and Sale Agreement, entered into with Payee, Aerus LLC, Aerus Canada, Inc., or any other affiliate of Payee or the breach of any of the terms or conditions of any loan agreement, document, or instrument or any franchise or other agreement entered into with Payee, Aerus LLC, Aerus Canada, Inc., or any other affiliate of Payee, which default or breach continues beyond any period of grace therein provided.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to the 2025 Aerus Franchise Disclosure Document, several actions can be triggered if an Aerus franchisee or any guarantor faces financial distress, such as insolvency or bankruptcy. Specifically, if an involuntary petition or complaint is filed against the franchisee or any guarantor seeking bankruptcy or reorganization, or the appointment of a receiver, custodian, trustee, intervenor, or liquidator, it constitutes an event of default if not dismissed within 45 days. Similarly, an order or judgment approving a petition for reorganization or appointing a receiver, custodian, trustee, intervenor, or liquidator also triggers a default.
Furthermore, the failure of the franchisee or any guarantor to discharge any attachment, sequestration, execution, or similar proceeding against their property within 10 days of commencement also constitutes a default. Additionally, if Aerus's liens, mortgages, or security interests in any collateral for a promissory note become unenforceable or cease to be first priority, it is considered a default. The occurrence of any "default" as defined in the Franchise Agreement also triggers consequences.
Moreover, any default as defined in any promissory note, Security Agreement, Product Sales Agreement, or Asset Purchase and Sale Agreement with Aerus, Aerus LLC, Aerus Canada, Inc., or any other affiliate, or the breach of any terms or conditions of any loan agreement, document, instrument, franchise, or other agreement with these entities, which continues beyond any grace period, also constitutes a default. These defaults provide Aerus with certain rights and remedies as outlined in the franchise agreement and related documents.
In practical terms, these provisions mean that an Aerus franchisee's business and personal finances are closely linked. Any significant financial distress faced by the franchisee or their guarantor can have serious repercussions for the franchise agreement. Prospective franchisees should carefully consider the implications of these clauses and ensure they have a solid financial plan and understand the risks involved. It is advisable to seek legal and financial counsel to fully understand the obligations and potential consequences associated with these default triggers.