Can Aw apply payments to past due indebtedness of its affiliates?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
- 10.7 Application of Payments. When we receive a payment from you, we have the right in our sole discretion to apply it as we see fit to any past due indebtedness of yours due to us or our affiliates, whether for royalties, Marketing Fund contributions, purchases, interest, or for any other reason, regardless of how you may designate a particular payment to be applied.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, Aw has the right to apply payments it receives from a franchisee to any past due debts the franchisee owes to Aw or its affiliates. This applies regardless of how the franchisee intended the payment to be applied, and covers debts for royalties, marketing fund contributions, purchases, interest, or any other reason.
This means that if an Aw franchisee has outstanding debts to either Aw itself or any of Aw's affiliated companies, Aw can use any payment received from the franchisee to settle those debts first. The franchisee does not have the power to designate how their payments are applied if they have outstanding debt.
For a prospective Aw franchisee, this highlights the importance of staying current on all payments due to Aw and its affiliates. Failure to do so could result in Aw reallocating payments intended for current obligations to cover older debts, potentially leading to further late fees or other penalties. This clause protects Aw and its affiliates by ensuring they have the flexibility to manage and recover outstanding debts from franchisees.