What happens if an Aplus franchisee defaults on the agreement, and Sunoco uses the Collateral Security Deposit to correct the default?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
o purchase any or all of the property to be sold at either public or private sale, free from any right of redemption on the part of you.
- 3.4.7. Sunoco shall be the sole determiner of the disposition of said Collateral Security Deposit. Sunoco's deposit of said Collateral Security Deposit shall not release you of any obligations contained in this Agreement. Should Sunoco use the Collateral Security Deposit, Sunoco may require changes in credit terms, if any, with you.
- 3.4.8. In the event you are in default at any time in the performance of any of the terms and conditions of this Agreement, Sunoco shall have the right, but not the obligation (in addition to any other remedies it has or may possess either at law, in equity, or under the terms of this Agreement) to correct said default and to deduct any resulting costs
Source: Item 23 — RECEIPT (FDD pages 68–302)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, if a franchisee defaults on any terms or conditions of the agreement, Sunoco has the right, but not the obligation, to correct the default. Sunoco can deduct any resulting costs or expenses from the franchisee's Collateral Security Deposit.
This means that if an Aplus franchisee fails to meet their obligations, such as maintaining the store or paying fees, Sunoco can step in to rectify the situation. For example, if the franchisee fails to make necessary repairs, Sunoco can arrange for the repairs and then deduct the cost from the security deposit. This protects Sunoco's interests and ensures the Aplus store maintains standards.
Following any deduction from the Collateral Security Deposit, Sunoco will notify the franchisee, who must then immediately restore the deposit to its full amount. Additionally, Sunoco may change the credit terms with the franchisee. This ensures that Sunoco maintains the full security deposit amount and can adjust the financial relationship with the franchisee based on the increased risk of default.
This policy is fairly standard in franchising, as it provides a mechanism for the franchisor to protect its brand and recover costs associated with franchisee non-compliance. However, it's crucial for prospective Aplus franchisees to understand that they are responsible for replenishing the security deposit immediately after any deduction and that their credit terms with Sunoco could be altered, potentially increasing their financial burden.