In the Alloy surety bond, what is the effect of cancellation on franchise agreements entered into before the cancellation date?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
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
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the cancellation of the surety bond does not eliminate liabilities for franchise agreements entered into before the cancellation date. The bond remains in effect for liabilities of Alloy that arose prior to the cancellation date.
Specifically, the surety can cancel the bond by providing 30 days' written notice via registered mail to both Alloy and the Washington State Securities Division. The cancellation becomes effective after this 30-day period, starting from when the Securities Division receives the notice and proof that Alloy also received it. However, this cancellation only applies prospectively.
This means that if Alloy fails to comply with the Washington State Franchise Investment Protection Act before the bond is cancelled, the surety remains liable for those failures, even after the cancellation date. This protection benefits franchisees who entered into agreements before the cancellation, as they can still make claims against the bond for Alloy's prior non-compliance. Franchisees in Washington should be aware of this protection, as it provides a degree of financial security related to Alloy's obligations under state law.