In the event of an Aw franchise assignment, do any other amounts owed to Aw or its affiliates take precedence over installment payments to the assignor?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
- (i) you must have entered into an agreement with us agreeing that any obligations of the assignee to make installment payments of the purchase price to you will be subordinate to the assignee's ongoing obligations to us, including, without limitation, royalty fees, marketing fund contributions, obligations for purchases from us or our affiliates and any other amounts owed to us or our affiliates.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, if a franchisee assigns their franchise to a new owner, any ongoing financial obligations the new owner owes to Aw take precedence over any installment payments they owe to the original franchisee for the purchase of the franchise. This includes, but is not limited to, royalty fees, marketing fund contributions, and payments for purchases from Aw or its affiliates.
This means that if the new franchisee is struggling financially, Aw will be paid first, before the original franchisee receives any further installment payments. This could create a financial risk for the seller, as they may not receive the full agreed-upon price for their franchise if the buyer's business underperforms or if the buyer defaults on their obligations to Aw.
This clause protects Aw's revenue stream and ensures that its financial interests are prioritized in the event of a franchise assignment. For a prospective Aw franchisee looking to sell their business in the future, it's crucial to understand that the ability to receive the full sale price in installments is contingent on the financial health and payment behavior of the buyer, and that Aw's claims will take precedence.