Can Sunoco require additional security from an Aplus franchisee as a condition of funding, and who determines this?
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.
Source: Item 23 — RECEIPT (FDD pages 68–302)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, Sunoco has the right to require additional security from Aplus franchisees. Prior to opening an Aplus store, a franchisee must deposit collateral security, with a minimum of $10,000, with Sunoco. This deposit serves as security for any present, past, or future financial obligations the franchisee may have to Sunoco.
Sunoco retains the sole discretion to demand a larger Collateral Security Deposit or other additional security, either before the store opens or at any point during the contractual period. They can also require the franchisee to execute and deliver additional or updated financing statements, security agreements, or other documents.
The amount of the Collateral Deposit can be changed, substituted, reduced, or increased at any time by mutual agreement between Sunoco and the franchisee. This indicates that while Sunoco has the initial authority to set and adjust the security deposit, there is room for negotiation and mutual agreement on these terms.