In an installment sale of a Chem Dry franchise, what guarantees must the franchisee continue to provide?
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, a franchisee transferring ownership must meet several conditions to ensure a smooth transition and protect Chem Dry's interests. The franchisee must correct any existing deficiencies in the business that Chem Dry has identified. If correcting the deficiencies is not possible, Chem Dry may allow the new owner to upgrade the business, including equipment and vehicles, to meet current standards for new or transferred Chem Dry businesses. This upgrade must be completed within a timeframe specified by Chem Dry. These requirements help maintain the quality and consistency of the Chem Dry brand across all locations.
Additionally, the franchisee and their transferring owners (including spouses or immediate family members) must agree in writing not to engage in activities that compete with Chem Dry for two years following the transfer. Chem Dry must approve the material terms and conditions of the transfer, including the purchase and sale agreement, to ensure that the price and payment terms do not negatively impact the new owner's ability to operate the business successfully. This non-compete agreement protects Chem Dry from losing customers or market share to a former franchisee who might start a competing business nearby.
The purchase agreement must include a detailed breakdown of the sale price, allocating amounts to goodwill, the non-compete agreement, vehicles, cleaning equipment, cleaning supplies, and office equipment. It must also state that the franchisee has fully disclosed all relevant information to the new owner and that both parties have agreed on how to handle any outstanding obligations and accounts receivable. This transparency ensures that the new owner is fully informed about the financial state of the business and that all financial matters are settled appropriately. Finally, the transfer must comply with all applicable laws, including state and federal laws governing franchise sales, ensuring the legality and legitimacy of the transaction.