Can Aw disregard a franchisee's designation of how a particular payment should be applied?
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 from franchisees as it sees fit. Specifically, Aw can apply payments to any past due indebtedness, regardless of how the franchisee designates the payment. This includes royalties, marketing fund contributions, purchases, interest, or any other reason the franchisee may owe Aw or its affiliates.
This policy gives Aw significant control over how franchisee payments are allocated. It means that even if a franchisee intends a payment to cover a specific expense, Aw can instead apply it to older, outstanding debts. This could put franchisees in a difficult position if they are trying to manage their cash flow and prioritize certain payments.
For a prospective Aw franchisee, this highlights the importance of staying current on all payments to avoid giving Aw the discretion to reallocate funds. Franchisees should maintain detailed records of all payments and outstanding debts to ensure transparency and address any discrepancies promptly. It is also advisable to discuss this payment application policy with Aw during the due diligence phase to fully understand its implications.