If All Team collects a Delinquent Account, how does that affect the franchisee's payments?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
The balance of any Accounts Receivable remaining unpaid in whole or in part for more than 90 days from the Customer Invoice date and the balance of any Accounts Receivable owing by any Customer who is bankrupt or insolvent or who voluntarily seeks protection under the federal bankruptcy laws or against whom involuntary relief in bankruptcy is sought, or who has filed an assignment for the benefit of creditors prior to the expiration of such 90 day period, or as to whom we have a reasonable basis for believing that such Customer is about to become subject to one of the foregoing conditions or events shall be deemed a "Delinquent Account." The full amount of each Delinquent Account shall be deducted from the Purchase Price or, at our election, be paid by you to us upon demand. Any Delinquent Account that is subsequently collected by us shall be added to the next payment of your Purchase Price (less any other amounts due to us, including without limitation any interest, deductions or offsets permitted hereunder).
Source: Item 10 — FINANCING (FDD pages 17–18)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, a "Delinquent Account" is defined as any account receivable that remains unpaid for more than 90 days from the invoice date, or any account where the customer is bankrupt, insolvent, or seeking bankruptcy protection. If an account is deemed delinquent, All Team will deduct the full amount of the delinquent account from the franchisee's purchase price or require the franchisee to pay the amount upon demand. This means the franchisee bears the risk of customer non-payment beyond the 90-day window.
However, if All Team subsequently collects a Delinquent Account, the collected amount will be added to the franchisee's next payment of their Purchase Price. This is after deducting any other amounts the franchisee owes to All Team, including interest, deductions, or offsets. This clause ensures that franchisees are reimbursed if All Team manages to recover funds from previously delinquent accounts, although the reimbursement is not immediate and is subject to deductions.
This arrangement has implications for cash flow management. Franchisees need to be prepared for potential deductions due to delinquent accounts and should factor this risk into their financial projections. While the possibility of reimbursement exists, it is not guaranteed, and the timing is uncertain. Franchisees should maintain diligent records of their accounts receivable and closely monitor customer payment behavior to minimize the risk of accounts becoming delinquent. Understanding the terms and conditions related to delinquent accounts is crucial for franchisees to manage their finances effectively and maintain a healthy working relationship with All Team.