Under what condition is an All Team USER excused from being duly qualified to do business in a jurisdiction?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
USER warrants and represents that (a)USER is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation and
agrees that it shall not change such state or jurisdiction of incorporation without giving ATFC sixty (60) days prior written notice of such change, (b)USER is duly qualified to do business and in good standing in each other jurisdiction where its ownership of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a material adverse effect on USER's business or assets, (c)USER operates its Business in material compliance with all applicable local, state and federal laws, including without limitation the Fair Labor Standards Act and all applicable tax withholding laws and regulations, and (d) each purchased Account Receivable: (i) is genuine and valid and represents a completed delivery or performance in fulfillment in every respect of the terms, conditions and specifications of a bona fide, un-canceled and unexpired sale or service in the ordinary course of business to a Customer which is not affiliated with USER in full compliance with the specifications of such Customer; (ii) is enforceable for the full amount thereof and shall at the time submitted to ATFC be subject to no Dispute; (iii) is free of all security interests, liens and encumbrances except for the lien granted to ATFC under this Funding Agreement or the Security Agreement; and (iv) is payable in United States Dollars and has been invoiced to the Customer by an invoice that bears notice of the sale and assignment to ATFC in compliance with the terms of this Funding Agreement.
Source: Item 23 — RECEIPT (FDD pages 34–161)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, a USER (franchisee) is generally required to be duly qualified to conduct business in any jurisdiction where their business operations or property ownership necessitates such qualification. However, there's an exception to this rule.
The All Team franchisee is not required to be duly qualified in a jurisdiction if the failure to be so qualified could not reasonably be expected to have a material adverse effect on the franchisee's business or assets. This means that if the lack of qualification in a particular jurisdiction poses no significant threat to the financial health or operational stability of the All Team franchise, the franchisee is excused from meeting that qualification requirement.
This clause provides some flexibility for All Team franchisees, particularly those operating near state lines or in multiple jurisdictions where the cost and administrative burden of maintaining qualifications in every location might outweigh the actual risk of non-compliance. However, it's crucial for prospective franchisees to carefully assess what constitutes a 'material adverse effect' in their specific circumstances and to consult with legal counsel to ensure they are in compliance with all applicable laws and regulations.