What assurance must a Chem Dry franchisee provide if they finance part of the sale price?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
- j. in the case of an installment sale, a transaction where FRANCHISEE provides financing to transferee, transferee pays Franchisee via a promissory note or other structured payment plan, FRANCHISEE must continue to guarantee performance and all payment obligations to Franchisor under this Agreement until the final closing of the installment sale or final payment of such structured payment arrangement;
- k. if you finance any part of the sale price of the transferred interest, then (a) you agree and will assure that all of the transferee's obligations under any promissory notes or agreements are subordinate to the transferee's obligation to pay Monthly Franchise Fees, BMF Contributions, and other amounts due to us and otherwise to comply with this Agreement, (b) you will not hold any security interest reserved in the business, and (c) you will enter into a comfort letter assuring us that the transferee will meet its obligations under the Franchise Agreement, and reaffirming your guaranty of the Franchise Agreement;
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, if a franchisee provides financing to a transferee in an installment sale, they must provide certain assurances to Chem Dry. The franchisee must agree to ensure that the transferee's obligations to pay monthly franchise fees, Brand Marketing Fund (BMF) contributions, and other amounts owed to Chem Dry take precedence over any promissory notes or agreements between the franchisee and transferee.
Additionally, the franchisee is prohibited from holding any security interest in the Chem Dry business being transferred. This means the franchisee cannot claim the business assets as collateral in case the transferee defaults on their payment obligations.
Finally, the franchisee must provide Chem Dry with a comfort letter. This letter serves as a guarantee that the transferee will fulfill their obligations under the Franchise Agreement. It also reaffirms the franchisee's ongoing guaranty of the Franchise Agreement, meaning the original franchisee remains responsible for the business's performance even after the transfer until the installment sale is fully completed.