Under the Bevaris Alliance agreement, what is the Individual required to do if they prove in the liquidation of the Franchisee?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
22.5 The Individual shall not, until all of the Franchisee's obligations under this agreement have been finally performed and paid in full, exercise any right:
(a) of subrogation and indemnity; or
(b) to take the benefit of, share in or enforce any security or other guarantee or indemnity for any of the Franchisee's obligations; or
(c) to prove in the liquidation of the Franchisee, other than in accordance with the Franchisor's instructions.
22.6 If the Individual exercises any of the rights referred to in clause 22.5, he or she shall:
- (a) hold any amounts recovered on trust for the Franchisor; and
- (b) pay them to the Franchisor on demand.
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
According to the 2024 Bevaris Alliance Franchise Disclosure Document, if the Individual (guarantor) proves in the liquidation of the Franchisee, they must do so in accordance with the Franchisor's instructions. Furthermore, if the Individual exercises any rights related to subrogation, indemnity, or security benefits before the Franchisee's obligations are fully performed and paid, they must hold any recovered amounts in trust for Bevaris Alliance and pay those amounts to Bevaris Alliance on demand.
This clause protects Bevaris Alliance's financial interests in case of the Franchisee's liquidation. By requiring the Individual to follow Bevaris Alliance's instructions in liquidation proceedings and to turn over any recovered amounts, Bevaris Alliance ensures that its claims are prioritized and that the Individual does not benefit at the expense of Bevaris Alliance before all debts are settled.
This is a fairly standard practice in franchising, as franchisors typically want to ensure their financial interests are protected when franchisees face financial difficulties. Prospective Bevaris Alliance franchisees should understand that the Individual's guarantee is a significant commitment, and they should carefully consider the potential financial risks before entering into the agreement.