Does the obligation to pay amounts owed to Aw after termination include amounts owed to Aw's affiliates?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
- 16.1 Payment of Amounts Owed to the Company. You agree to pay to us within ten (10) days after the effective date of termination or expiration (without renewal) of this Agreement such royalty fees, marketing fund contributions, service charges due us on any of the foregoing and all other amounts owed to us and our affiliates which are then unpaid. You must furnish a complete accounting of all such amounts owed to us and our affiliates with the payment.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, upon termination or expiration of the franchise agreement, the franchisee is obligated to pay all amounts owed to Aw and its affiliates. Specifically, the franchisee must pay any unpaid royalty fees, marketing fund contributions, and service charges, as well as any other outstanding debts to Aw and its affiliates, within ten days of the termination or expiration date. The franchisee must also provide a complete accounting of all such amounts owed at the time of payment. This obligation ensures that Aw and its affiliates receive all outstanding payments before the franchisee ceases operations.
This requirement has significant implications for prospective Aw franchisees. It means that franchisees must maintain accurate financial records and ensure timely payments throughout the term of the agreement. Failure to do so could result in a substantial financial burden upon termination, as all outstanding debts, including those owed to affiliates, become immediately due. Franchisees should be aware that this obligation extends beyond just royalty fees and marketing contributions, encompassing any other amounts owed to Aw or its affiliates for any reason.
Furthermore, Aw has the right to apply any payment received from a franchisee to any past due indebtedness owed to Aw or its affiliates, regardless of how the franchisee designates the payment. This includes royalties, marketing fund contributions, purchases, or interest. This provision gives Aw considerable discretion in managing payments and ensuring that all outstanding debts are settled, which could impact the franchisee's financial planning and cash flow management.
In summary, prospective Aw franchisees should carefully consider the financial implications of this termination clause. They should ensure they understand the full scope of their financial obligations to both Aw and its affiliates and maintain diligent financial practices to avoid accumulating debt that could become due upon termination or expiration of the franchise agreement.