Under what conditions will principals of an Aerus franchised business be required to guarantee the Note?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
ent as part of Exhibit 3. The Note will be guaranteed by any principals of the
Franchised Business in the following cases: (i) fraud or misrepresentation in connection with the execution or performance of the Franchise Agreement, the Note or any other financing agreements; (ii) theft or conversion of the assets of us or any of the our affiliates including any consigned goods or proceeds from the sale of any consigned good (which may include selling such consigned goods at prices below the required prices); misuse or infringement of any trademark or other item of intellectual property or right owned or licensed by us or any of our affiliates; or (iii) breach or violation of any license granted under the Franchise Agreement concerning such trademarks and intellectual property. Additionally, you will be required to execute a Security Agreement and Guarantee (in the forms attached to this Disclosure Document as part of Exhibit 3), financing statement and any other related documents as necessary or reasonable to protect and perfect the interest of us or our affiliate, as lender. The Note will bear interest from 0% to 7% per annum (or the maximum rate permitted by applicable law, whichever is less) and will have a term ranging from one to five years.
The following table summarizes the previous paragraph:
| Item Financed | Asset Purchase, Security Deposit, Initial Fees, Parts and Supplies |
|---|---|
| Initial Payment | At least $2,500 |
| Term (Yrs.) | 1 to 5 years |
| APR (%) | 0% to 7% (or the maximum rate permitted under applicable law, whichever is less) |
| Monthly Payment | Level payments based on an amount financed |
| Prepay Penalty | None, you may prepay all amounts owed without penalty |
| Security Required | Limited Personal Guaranty and perfected security interest in assets purchased under the Standard or Associate Programs. |
| Liability Upon Default | Accelerated balance, late fee equal to 5% of any overdue amount, termination of Franchise Agreement; |
Source: Item 10 — Financing (FDD pages 34–36)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, principals of a franchised business are required to guarantee the secured promissory note ('the Note') under specific circumstances related to misconduct or financial irregularities. These circumstances include fraud or misrepresentation in connection with the execution or performance of the Franchise Agreement, the Note, or any other financing agreements. Principals must also guarantee the Note in cases of theft or conversion of Aerus's assets or its affiliates, including consigned goods or proceeds from their sale, especially if such goods are sold below required prices.
Additionally, principals must guarantee the Note if there is misuse or infringement of any trademark or other intellectual property owned or licensed by Aerus or its affiliates, or any breach or violation of any license granted under the Franchise Agreement concerning such trademarks and intellectual property. The franchisee will also be required to execute a Security Agreement and Guarantee, financing statement and any other related documents as necessary or reasonable to protect and perfect the interest of Aerus or its affiliate, as lender.
These conditions are in place to protect Aerus from financial loss due to franchisee misconduct or negligence. The Note will bear interest from 0% to 7% per annum (or the maximum rate permitted by applicable law, whichever is less) and will have a term ranging from one to five years. This requirement ensures that the franchisor has recourse to the personal assets of the business's principals in cases of significant default or malfeasance, which is a fairly standard practice in franchising to mitigate risk.
Furthermore, events of default under the Note include failure to pay amounts within 5 days of the due date; bankruptcy or insolvency of you or your guarantors; default under any Franchise Agreement with Aerus; and default under any agreement, document, or instrument or any franchise or other agreement entered into with Aerus or its affiliates, which default or breach continues beyond any period of grace therein provided.