What does Sunoco have the right to do with the collateral security if an Aplus franchisee has outstanding obligations?
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. 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.
- 3.4.5. The amount of the Collateral Deposit may be changed, substituted, reduced or increased at any time by mutual agreement of Sunoco and you.
- 3.4.6. You authorize Sunoco to apply the collateral security to the payment of any obligation indebtedness, liability or tax outstanding of you to Sunoco, or for which Sunoco may become liable at any time during or at the end of any relationship with you.
Source: Item 23 — RECEIPT (FDD pages 68–302)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, Sunoco holds the Collateral Security Deposit as a general security for any present, past, or future debts the franchisee owes. This deposit, which must be no less than $10,000, acts as collateral that Sunoco can use to cover any outstanding obligations. Sunoco has the right to demand a larger deposit or additional security at any time during the agreement.
Specifically, Sunoco can use the Collateral Security Deposit to cover any indebtedness or balance of indebtedness that the franchisee owes to Sunoco due to any obligation. This means that if an Aplus franchisee fails to meet their financial responsibilities to Sunoco, Sunoco can tap into this deposit to recoup the funds. The amount of the Collateral Security Deposit can be adjusted if both Sunoco and the franchisee agree.
In the event that the franchisee fails to fulfill their obligations under the lease, including the payment of any charges or costs, Sunoco has the discretion to either perform those obligations itself or pay those costs. These costs or payments will then be considered additional charges that the franchisee must pay to Sunoco within five days of demand. Sunoco can also use all or part of the Collateral Security Deposit to cover these costs and payments.
This arrangement protects Sunoco from financial losses due to franchisee non-compliance. For a prospective Aplus franchisee, it highlights the importance of maintaining good financial standing and meeting all contractual obligations to avoid losing the security deposit. It is also important to note that the franchisee represents that all money deposited is free of third-party claims.