What is the purpose of the 'Collateral Security Deposit' for an Aplus franchise, and where is it described in the agreement?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
to Franchisor through a method that Franchisor approves.
3.3. Minimum Monthly Royalty Fee
If the Royalty Fee paid to Franchisor is less than the respective minimum monthly royalty fee ("Minimum Monthly Royalty Fee") as described in Attachment 1, then Franchisee shall pay to Franchisor the difference between monthly Royalty Fee and the respective Minimum Monthly Royalty Fee, payable at the same time and in the same manner as the Royalty Fee.
3.4. Collateral Security Deposit
Prior to the opening of the Store, you shall deposit with us cash collateral in the amount stated in Attachment 1 ("Collateral Security Deposit"). The Collateral Security Deposit shall be held by Sunoco as one general, continuing, collateral security for the discharge and payment of the whole, or any part of any present, past, or future obligation indebtedness, or liability of you to Sunoco. You agree to enter into any additional financing statements, security agreement, or other documents deemed necessary by Sunoco. Further:
- 3.4.1. You shall pay to Sunoco a Collateral Security Deposit in an amount determined by Sunoco and no less than Ten Thousand Dollars ($10,000) or another amount stated in Attachment 1, which is due and payable prior to the opening of the APLUS Store. Sunoco, at its sole discretion, may, prior to the opening of the store and/or at any time during the contractual period require a larger Collateral Security Deposit, or other additional security, and also require that you execute and deliver additional and updated financing statements, security agreements or other documents.
- 3.4.2. You represent that all money deposited herein, is and/or shall be free and discharged of all third party claims, assignments, trust and legal processes.
- 3.4.3. You shall pay to Sunoco any indebtedness or balance of indebtedness whatsoever which you owe to Sunoco by
Source: Item 23 — RECEIPT (FDD pages 68–302)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, the Collateral Security Deposit is described in Section 3.4. The purpose of this deposit is to act as a general, continuing collateral security for the discharge and payment of any present, past, or future obligations, indebtedness, or liability of the franchisee to Sunoco.
Prior to opening the Aplus store, the franchisee must deposit cash collateral with Sunoco, with a minimum of $10,000 or another amount stated in Attachment 1. Sunoco has the discretion to require a larger deposit or additional security at any time during the contractual period, and may also require the franchisee to execute additional financing statements or security agreements.
The franchisee represents that all deposited money is free of third-party claims. Sunoco can use the deposit to cover any indebtedness the franchisee owes to Sunoco. The amount of the Collateral Security Deposit can be changed, substituted, reduced, or increased by mutual agreement between Sunoco and the franchisee.