What restrictions are placed on the resale of equipment by a Chem-Dry franchisee?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
TRANSFER OF OWNERSHIP. Franchisee acknowledges that the Franchise Agreement imposes restrictions and limitations on the resale of the Equipment. Franchisee acknowledges that the Equipment may not be sold, leased, or rented to or used by any other party, except under the conditions stated on the attached repurchase schedule, as provided in the Franchise Agreement, or as permitted in writing by CDI. The Equipment is proprietary and authorized for use only within the Chem-Dry® franchise network. Franchisee covenants that Franchisee will not transfer title to the Equipment except in one of these three ways:
Sell the Equipment to another Chem-Dry Franchisee in good standing under its franchise agreement at a mutually acceptable price. CDI has first right of refusal to purchase the Equipment and must approve any transaction. If CDI financed any portion of the purchase price of the Equipment, the transferee will pay the proceeds to CDI if there is any outstanding balance under the Schedule for the Equipment prior to transfer of the Equipment. At the time of transfer Franchisee's account with CDI must be current and the purchasing Franchisee may not have any pending default under any agreement with the proposed transferee.
If Franchisee is terminating or not renewing the Franchise Agreement and Franchisee owns another Chem-Dry franchise, the Equipment (and the liability for any amount owing on the purchase price of the Equipment) will be transferred to that franchise upon written request.
CDI will repurchase the Equipment in accordance with the table below. The percentages shown assume reasonable wear and tear and regular maintenance. If any components of the original piece of Equipment are missing, or there is damage or excessive wear and tear, CDI reserves the right to make a corresponding adjustment to the repurchase price. The original Total Equipment Price under its Schedule will be reduced to the applicable percentage in effect based on the time elapsed after original purchase.
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem-Dry's 2024 Franchise Disclosure Document, a franchisee faces several restrictions when reselling equipment. The equipment can't be sold, leased, or rented to another party unless it's under the conditions of the repurchase schedule, as stated in the Franchise Agreement, or if Chem-Dry provides written permission. Chem-Dry equipment is proprietary and intended for use only within the Chem-Dry franchise network.
A Chem-Dry franchisee can sell equipment to another Chem-Dry franchisee in good standing if both parties agree on a price. However, Chem-Dry has the first right of refusal to purchase the equipment and must approve the transaction. If Chem-Dry financed any part of the equipment, the proceeds from the sale must first cover any outstanding balance owed to Chem-Dry before the equipment is transferred. The selling franchisee's account with Chem-Dry must be current, and the purchasing franchisee cannot have any pending defaults with the seller.
If a Chem-Dry franchisee is terminating or not renewing their Franchise Agreement but owns another Chem-Dry franchise, the equipment can be transferred to that other franchise upon written request. This transfer also includes the responsibility for any remaining payments on the equipment. Chem-Dry may also repurchase the equipment based on a predetermined schedule, with the repurchase price adjusted for wear and tear and regular maintenance. Missing components or excessive damage can further reduce the repurchase price.