In an installment sale of a Chem Dry franchise, what guarantee obligations does the franchisee retain?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
r. the transfer must be made in compliance with any laws that apply to the transfer, including state and federal laws governing the offer and sale of franchises;
s.
FRANCHISEE has corrected any existing deficiencies of the BUSINESS of which CDI has notified FRANCHISEE, and/or (ii) CDI permits, and the transferee agrees (if the transfer is of this Agreement) to upgrade the BUSINESS (including the equipment and the van(s) to be transferred to the transferee) in accordance with CDI's then current requirements and specifications for entering or transferred CHEM-DRY Businesses within the time period CDI specifies following the effective date of the transfer;
- t.
FRANCHISEE and its transferring Owners (and any spouses or other immediate family members) acknowledge in a writing delivered to CDI that each of them will not, for two (2) years beginning on the transfer's effective date, engage in any of the activities proscribed in Section 16.D. below;
- u. e have approved the material terms and conditions of the transfer, the form or purchase and sale agreement, and determined that the price and terms of payment will not adversely affect the transferee's operation of the BUSINESS.
The purchase agreement between FRANCHISEE and the transferee must include: (a) a dollar breakdown of the sale price allocated to goodwill, covenant not to compete, van(s), cleaning equipment, cleaning supplies, and office equipment and supplies; and (b) a statement that FRANCHISEE has made a full disclosure to the transferee and that the parties have has agreed upon the disposition of all of FRANCHISEE'S outstanding obligations and accounts receivable;
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, in the event of a franchise transfer, the franchisee and their transferring owners (including spouses or immediate family members) must acknowledge in writing that they will not engage in activities proscribed in Section 16.D for two years following the transfer's effective date. Additionally, the purchase agreement must include a dollar breakdown of the sale price allocated to various assets like goodwill, covenant not to compete, vans, cleaning equipment, and office supplies. It must also state that the franchisee has made full disclosure to the transferee regarding outstanding obligations and accounts receivable, and that both parties have agreed on their disposition.
Chem Dry requires that the transfer must comply with all applicable laws, including state and federal laws governing franchise sales. Furthermore, the franchisee must correct any existing deficiencies in the business that Chem Dry has notified them of. Alternatively, with Chem Dry's permission, the transferee can agree to upgrade the business, including equipment and vans, to meet Chem Dry's current standards for new or transferred businesses within a specified timeframe.
Chem Dry must approve the material terms and conditions of the transfer, the form of the purchase and sale agreement, and determine that the price and payment terms will not negatively impact the transferee's operation of the business. These stipulations ensure that the transfer process is legally sound, that the business is in good standing, and that the new franchisee has a solid foundation for future operations, while also protecting Chem Dry's interests and brand standards.