Is Aerus required to maintain the security deposit in a separate account, and is the franchisee entitled to interest on the security deposit?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
Company need not maintain the Security Deposit in a separate account, and Company may co-mingle the Security Deposit with any of Company's accounts or funds.
Franchisee will not be entitled to any interest on the Security Deposit.
In addition to the foregoing, Franchisee shall from time to time during the term of this Agreement, at Company's request, pay to Company as an increase to the Security Deposit, an amount equal to the Standard Allocation of all Consigned Products which remain in Franchisee's inventory for ninety (90) days or longer.
Company will refund such increases to the Security Deposit within thirty (30) days after Franchisee provides evidence satisfactory to Company confirming the sale of such Consigned Products in accordance with the terms of this Agreement.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, Aerus is not required to maintain the security deposit in a separate account. Aerus has the right to co-mingle the security deposit with any of its other accounts or funds. This means that the money paid as a security deposit can be used by Aerus for its own business purposes.
Furthermore, the document specifies that the franchisee will not be entitled to any interest on the security deposit. Therefore, any earnings generated from the security deposit while it is held by Aerus will not be passed on to the franchisee. This is a common practice in franchising, as the security deposit is primarily intended to protect the franchisor against potential losses or damages caused by the franchisee.
In addition to the initial security deposit, Aerus may request an increase to the security deposit based on the Standard Allocation of all Consigned Products remaining in the franchisee's inventory for ninety (90) days or longer. However, Aerus will refund these increases within thirty (30) days after the franchisee provides satisfactory evidence of the sale of these consigned products, in accordance with the terms of the agreement. This condition ensures that the security deposit accurately reflects the value of the consigned products held by the franchisee.