What is the purpose of the 'Collateral Security Deposit' for an Aplus franchise, as described in the agreement?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
anchisor 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 reason of any obligation now or hereafter undertaken by you in favor of Sunoco.
- 3.4.4.
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 serves as a financial safeguard for Sunoco, Aplus's parent company, against potential franchisee liabilities. Prior to opening their Aplus store, franchisees must deposit cash collateral, with a minimum of $10,000 or another amount specified in Attachment 1, with Sunoco.
The primary purpose of this deposit is to act as a general, continuing security for any present, past, or future financial obligations the franchisee may have to Sunoco. This includes any form of indebtedness or liability incurred by the franchisee. Sunoco has the authority to request additional financing statements, security agreements, or other documents deemed necessary to secure their position.
Sunoco also retains the right to increase the required Collateral Security Deposit or demand additional security at any point during the contractual period, even before the store opens. The amount of the deposit can be changed, substituted, reduced, or increased through mutual agreement between Sunoco and the franchisee. This deposit ensures that funds are available to cover any debts or obligations the franchisee may accrue to Sunoco during the franchise term.