How are the proceeds of sale or operation of the Benjamin Franklin Plumbing business applied in the event of a default?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
The proceeds of sale or operation for Debtor's account shall be applied in total or partial satisfaction of Debtor's obligations to Secured Party and for Secured Party's costs incurred in proceeding under this paragraph.
All proceeds shall be applied first to cover Secured Party's costs, and second to satisfy Debtor's obligations to Secured Party.
To the extent there is still any deficiency in the amount Secured Party is owed, Secured Party may collect the same from Debtor, and, to the extent that any excess proceeds exist (after the application of such proceeds as provided for herein and under the law), Secured Party shall pay the same to Debtor.
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to Benjamin Franklin Plumbing's 2025 Franchise Disclosure Document, in the event of a Debtor's default, the proceeds from the sale or operation of the business are applied to cover the Secured Party's costs first. Following this, the proceeds are used to satisfy the Debtor's obligations to the Secured Party. This means that any expenses incurred by Benjamin Franklin Plumbing in taking action due to the franchisee's default are prioritized for reimbursement.
If there is still a deficiency after covering the Secured Party's costs and satisfying the Debtor's obligations, the Secured Party has the right to collect the remaining amount from the Debtor. Conversely, if there are excess proceeds remaining after all obligations and costs have been covered, these excess proceeds are to be paid back to the Debtor. This ensures that the franchisee receives any remaining funds after the franchisor has been made whole.
This process protects Benjamin Franklin Plumbing by ensuring their costs are covered first in the event of a franchisee's default. It also provides a mechanism for the franchisee to recoup any excess funds remaining after all obligations have been met. Prospective franchisees should understand these procedures, as they outline the financial implications of defaulting on their obligations to the franchisor.