In the event of an Aw franchise assignment, do obligations for purchases from Aw or its affiliates take precedence over installment payments to the assignor?

According to Aw's 2025 Franchise Disclosure Document, if a franchisee assigns their franchise to a new owner, the new owner's financial obligations to Aw take precedence over any installment payments owed to the original franchisee. Specifically, the agreement between the outgoing franchisee and Aw stipulates that any agreement for installment payments from the new franchisee to the old franchisee must be subordinate to the new franchisee's ongoing financial responsibilities to Aw. These responsibilities include royalty fees, marketing fund contributions, and payments for purchases from Aw or its affiliates, as well as any other amounts owed to Aw or its affiliates. This condition is part of the overall requirements for Aw's approval of the franchise assignment.

For a prospective Aw franchisee, this means that if they decide to sell their franchise and finance part of the sale through installment payments from the buyer, their right to receive those payments is secondary to Aw's right to receive ongoing fees and payments from the new franchisee. This protects Aw's revenue stream and ensures that the new franchisee prioritizes their financial obligations to the franchisor.

This arrangement is relatively common in franchising, as franchisors typically want to ensure their financial interests are protected during a transfer. However, it does introduce risk for the selling franchisee, who may need to carefully assess the financial stability of the buyer and the terms of the installment agreement, as their payments could be jeopardized if the new franchisee struggles to keep up with their obligations to Aw. Therefore, it would be prudent for a selling franchisee to seek legal and financial advice to fully understand the implications of this subordination clause.