Can Aw apply payments to past due purchases?

According to Aw's 2025 Franchise Disclosure Document, Aw has the right to apply payments from franchisees to past due debts. Specifically, Aw can apply payments to any past due indebtedness, including royalties, marketing fund contributions, purchases, or interest, regardless of how the franchisee designates the payment. This gives Aw broad discretion in how they allocate payments received from franchisees.

This policy has significant implications for Aw franchisees. Even if a franchisee intends a payment to cover a specific current expense, Aw can instead apply it to older outstanding debts. This could lead to a franchisee consistently falling behind on current obligations if past debts remain unpaid. Franchisees need to be aware that simply making payments does not guarantee their current bills are being covered.

Franchisees should maintain meticulous records of all payments and outstanding debts to reconcile how Aw applies their payments. If a franchisee disagrees with Aw's application of a payment, they would likely need to resolve the issue through communication with Aw, or potentially through legal means, considering the broad discretion Aw retains according to the franchise agreement. This clause underscores the importance of maintaining a positive financial relationship with Aw and proactively addressing any potential payment disputes.

This type of clause is not uncommon in franchise agreements, as it protects the franchisor's financial interests. However, franchisees should fully understand the implications and potential risks associated with such provisions. Franchisees should prioritize clear communication with Aw regarding payment allocations to avoid misunderstandings and potential financial difficulties.