Is the Alloy surety bond coverage still effective with respect to franchise agreements entered into by Principal prior to the effective date of cancellation?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
This Bond shall expire at such time as the Principal's registration is withdrawn, terminates through non-renewal, or is revoked by the Securities Division except as to liabilities of the Principal arising prior to such time. This Bond may also be cancelled by the Surety upon 30 days written notice by registered mail to the Principal and to the Securities Division. At the end of the 30 day period, the Bond shall be deemed cancelled except as to liabilities of the Principal arising prior to the date of cancellation. The notice of cancellation shall be deemed effective and the 30 day period shall begin to run upon
FRANCHISOR SURETY BOND Page 1 of 3 Revised April 22, 2010
receipt by the Securities Division of said notice and sufficient proof of receipt of said notice by the Principal.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the surety bond's coverage remains effective for liabilities arising before the cancellation date. Specifically, the bond may be canceled by the Surety with 30 days' written notice to both the Principal and the Securities Division. The cancellation becomes effective 30 days after the Securities Division receives the notice and proof that the Principal also received it. However, this cancellation does not absolve the Principal of liabilities that occurred before the cancellation date.
This means that even if the surety bond is canceled, it continues to cover any claims against Alloy that arose during the period the bond was active. This protection is crucial for franchisees who may have entered into agreements under the assumption that the surety bond would provide financial security. The surety bond offers a recourse for franchisees in the event that Alloy fails to comply with franchise regulations, providing a means to recover losses incurred due to such non-compliance, up to the bond amount.
For a prospective Alloy franchisee, this information provides assurance that financial protections are in place even if the surety bond is canceled in the future. It is important to verify with the franchisor and relevant state authorities that the surety bond is currently active and to understand the process for making a claim against the bond should the need arise. This ensures that franchisees are aware of their rights and the mechanisms available to protect their investment.