Under the Buns On Fire Guaranty, can the franchisor deal with the franchisee in any manner?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
5.9 Set Off Option
Franchisor may set off against any money owed by Franchisor or Franchisor's Affiliate(s) to Franchisee or Franchisee's Affiliate(s) pursuant to this Agreement or otherwise. This right to set off will continue until Franchisee has paid, satisfied or discharged all monies, debts or liabilities due or owing to Franchisor and Franchisor's Affiliates. Franchisee hereby irrevocably authorizes Franchisor or Franchisor's Affiliate to deduct from any monies payable by Franchisor or Franchisor's Affiliate to Franchisee or Franchisee's Affiliate(s) pursuant to this Agreement or otherwise any monies due or owing to Franchisor or Franchisor's Affiliates by Franchisee or Franchisee's Affiliate from time to time. If in Franchisee's jurisdiction set-off is not possible due to the local laws Franchisor or Franchisor's Affiliate(s) will hold
monies due to Franchisee or Franchisee's Affiliate as a lien, free from interest, until such time as Franchisee or Franchisee's Affiliate(s) have paid all monies owed by Franchisee or Franchisee's Affiliate to Franchisor or Franchisor's Affiliate(s).
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
According to the 2025 Buns On Fire Franchise Disclosure Document, the franchisor has a right to 'set off' any money that Buns On Fire or its affiliates owe to a franchisee or their affiliates. This 'set off' right allows Buns On Fire to deduct any monies due or owing to them or their affiliates from any payments they or their affiliates make to the franchisee or their affiliates, as stated in the franchise agreement or otherwise. This continues until all debts are settled. If the franchisee's jurisdiction does not allow set-offs, Buns On Fire or its affiliates will hold the money owed to the franchisee as a lien, without interest, until the franchisee has paid all outstanding debts.
This clause in the Buns On Fire franchise agreement means that if a franchisee owes money to Buns On Fire for any reason, Buns On Fire can legally reduce any payments they owe to the franchisee by the amount the franchisee owes them. This could impact the franchisee's cash flow, especially if the franchisee is expecting a payment from Buns On Fire and has outstanding debts. The lien provision ensures Buns On Fire can still recover debts in areas where set-off is not legal, but it also means the franchisee will not receive interest on the held funds.
Franchisees should be aware of this 'set off' option and understand the circumstances under which Buns On Fire might exercise this right. It is important to maintain good financial standing with Buns On Fire to avoid any disruptions to expected payments. Franchisees should also be aware of the laws in their jurisdiction regarding set-offs and liens, and how these laws might affect their financial relationship with Buns On Fire.