Under what circumstances might an Aerus franchisee be required to pay the full Standard Allocation for Consigned Products even if a sale has not occurred?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type Of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Standard Allocation | As established by us in the Manuals or otherwise in writing. Amount will vary depending upon your sales volume. | Promptly upon sale. | You must remit to us or our Affiliate the Standard Allocation for the Consigned Products sold. You may be required to pay to us or our Affiliate, the full Standard Allocation, as if a sale had occurred for any Consigned Products held in your inventory for 90 days or longer. |
| Security Deposit | 88% of the Standard Allocation for all Consigned Products held in your inventory. Amount will vary depending upon Consigned Products held in inventory and your sales volume. | On demand. | You may be required to increase the amount of your Security Deposit in the event the Consigned Products held in your inventory increases or in the event the Standard Allocation for such Consigned Products increases. |
Source: Item 6 — Other Fees (FDD pages 20–27)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, a franchisee may be required to remit the full Standard Allocation for consigned products even if a sale has not occurred. Specifically, if consigned products are held in the franchisee's inventory for 90 days or longer, Aerus or its affiliate can demand payment of the Standard Allocation as if the products were sold. The Standard Allocation amount itself is determined by Aerus and may vary based on the franchisee's sales volume.
This policy has significant financial implications for prospective Aerus franchisees. It means that franchisees must effectively manage their inventory to avoid holding consigned products for extended periods. Failure to do so could result in having to pay for products that have not generated revenue, impacting cash flow and profitability. This contrasts with typical retail practices where payment to suppliers is generally made only upon the sale of goods.
To mitigate this risk, an Aerus franchisee should implement robust inventory management practices, closely monitor product turnover, and proactively manage stock levels to align with sales demand. Additionally, the franchisee should seek clarification from Aerus regarding the specific calculation of the Standard Allocation for various products and sales volumes to better forecast potential inventory holding costs. Understanding these details is crucial for making informed decisions about product orders and inventory management strategies.
Furthermore, the franchisee should be aware that they may also be required to maintain a security deposit equal to 88% of the Standard Allocation for all consigned products held in their inventory. This deposit, combined with the potential requirement to pay the full Standard Allocation for products held over 90 days, represents a substantial financial commitment and underscores the importance of efficient inventory control.