Is the Manager obligated to make Advances to a C3 Wellness Spa practice?
C3_Wellness_Spa Franchise · 2024 FDDAnswer from 2024 FDD Document
3.04. Payment of Advances.
- (a) Advances. If there are insufficient funds in the Revenue Account to pay any Practice Expenses or other amounts owed by Practice, Manager may, in its sole discretion, advance funds on behalf of Practice from time to time ("Advance(s)"). Practice expressly grants Manager the authority to make any Advances during the Term without any notice provided by Manager or any further request made by Practice. Manager, however, has no obligation to make any Advance to Practice. Notwithstanding anything to the contrary in this Agreement, all Advances are due and payable upon demand to Practice by Manager. Further, any outstanding Advance plus interest unpaid at the date of termination of this Agreement is due and payable immediately at such date.
- (b) Interest. Advances will bear interest from the date disbursed by Manager until repaid, at the Interest Rate, compounded daily. Interest on such outstanding amounts will be computed on the basis of a 365- or 366-day year, as the case may be, and for the actual number of days elapsed. Practice promises to pay Manager the sum of all Advances made to Practice and all other amounts due and owing to Manager under this Agreement, plus interest accrued at the Interest Rate on such amounts according to the terms of this Article 3.
- 3.05. Practice Professional Compensation. To the extent funds are available in the Revenue Account or Practice otherwise makes funds available (and subject to the priorities set forth in Section 3.06 below), Manager will pay, on behalf of Practice when due, all Practice Professional Compensation.
- 3.06. Payment Priority. Each month Manager will apply funds that are in the Revenue Account in the following priorities:
- (a) To Practice Professional Compensation;
- (b) To all Practice Expenses;
- (c) To repay Manager for Advances by Manager;
- (d) To reimburse Manager for Practice Expenses paid by Manager;
- (e) To accrued and unpaid Management Fees;
- (f) To the Management Fee; and
- (g) To Manager or a designated entity for education and training.
In the event that either Party directs or diverts funds from the Revenue Account other than in accordance with the Payment Priority as stated above, such action will constitute a material breach of the
Source: Item 23 — RECEIPTS (FDD pages 59–293)
What This Means (2024 FDD)
According to the 2024 C3 Wellness Spa Franchise Disclosure Document, the Manager (likely referring to the franchisor or an affiliated management entity) is not obligated to make Advances to a C3 Wellness Spa practice. While the Manager has the option to advance funds if there are insufficient funds in the Revenue Account to cover Practice Expenses or other amounts owed by the Practice, this is at the Manager's sole discretion. The Practice expressly grants the Manager the authority to make these Advances without needing to provide notice or receive further requests. However, the Manager is under no obligation to provide any Advances.
Any Advances that the Manager does make are subject to specific terms. These Advances accrue interest from the date they are disbursed until they are repaid, calculated daily based on the Interest Rate. The Practice is obligated to repay all Advances, along with the accrued interest, to the Manager. If the Franchise Agreement is terminated, any outstanding Advance plus interest becomes immediately due and payable.
The FDD also outlines a payment priority system for funds in the Revenue Account. First priority is given to Practice Professional Compensation, followed by Practice Expenses. Repayment of Manager Advances and reimbursement for Practice Expenses paid by the Manager take the next priority. Management Fees and education/training expenses are lower on the priority list. This detailed structure ensures clarity in financial transactions between C3 Wellness Spa and its franchisees.