What can Beard Papas do with the payments received from suppliers?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
5.E. APPLICATION OF PAYMENTS
Franchisor has sole discretion to apply any payments received from Franchisee or to offset any indebtedness of Franchisee to Franchisor to any past due indebtedness of Franchisee for Royalty Fees, Advertising Contributions, purchases from Franchisor or its affiliates, interest or any other indebtedness of Franchisee to Franchisor or its affiliates.
5.F. WITHHOLDING PAYMENTS UNLAWFUL
Franchisee agrees that under no circumstance is Franchisee entitled to withhold payments due to Franchisor under this Agreement. Among other things and without limitation to the foregoing, Franchisee expressly agrees that any claim by Franchisee as to the alleged non-performance of Franchisor's obligations shall not permit and/or entitle Franchisee to withhold payments due Franchisor under this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to the 2025 Beard Papas Franchise Disclosure Document, Beard Papas has the sole discretion regarding the application of payments received from franchisees. Specifically, Beard Papas can apply payments to any past due indebtedness the franchisee owes.
This includes royalty fees, advertising contributions, purchases from Beard Papas or its affiliates, interest, or any other debts the franchisee has with Beard Papas or its affiliates. This means that if a franchisee has multiple outstanding debts, Beard Papas decides which debt gets paid first from any payment received.
This provision is fairly standard in franchising, allowing the franchisor to manage franchisee accounts and prioritize debt collection. However, it's crucial for a prospective Beard Papas franchisee to understand that overpayments will not necessarily be applied to the franchisee's preferred outstanding balance. Instead, Beard Papas has full authority to allocate those funds as it sees fit.
Furthermore, the FDD states that franchisees are not entitled to withhold payments due to Beard Papas under any circumstances, even if the franchisee believes Beard Papas is not fulfilling its obligations. This underscores the importance of resolving disputes through proper channels rather than unilaterally withholding payments, which could lead to further penalties or legal action.