Is an All States M.E.D. franchisee required to open and maintain an EDTA, and if so, at whose request?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisor shall require all Royalty Fees, amounts due for purchases by Franchisee from Franchisor and other amounts due to Franchisor to be paid through an Electronic Depository Transfer Account ("EDTA"). At Franchisor's request, Franchisee shall open and maintain an EDTA, and shall provide Franchisor with continuous access to such account for the purpose of receiving any payments due to Franchisor. Franchisee shall make deposits to the account sufficient to cover amounts owed to Franchisor prior to the date such amounts are due. Franchisee shall execute any documents Franchisor's or Franchisee's bank requires to establish and implement the EDTA. Once established, Franchisee shall not close the EDTA without Franchisor's written consent.
Source: Item 23 — RECEIPTS (FDD pages 44–174)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, franchisees are required to open and maintain an Electronic Depository Transfer Account (EDTA) at the franchisor's request. The purpose of this account is to allow All States M.E.D. continuous access for receiving payments owed by the franchisee.
The franchisee is responsible for making sufficient deposits into the EDTA to cover all amounts due to All States M.E.D. before the payment due date. To establish and implement the EDTA, the franchisee must also execute any documents required by either All States M.E.D.'s bank or the franchisee's bank.
Once the EDTA is established, the franchisee cannot close the account without obtaining written consent from All States M.E.D. This requirement ensures that All States M.E.D. has a reliable method for receiving payments throughout the term of the franchise agreement. This is a fairly common practice in franchising, allowing franchisors to automate and ensure timely collection of fees.