What is the significance of the effective date on the Chem Dry Equipment Purchase Schedule?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
This Agreement is made and entered into as of The Effective Date by and between Franchisee and CDI, and relates to the Franchise Agreement between Franchisee and CDI for Franchisee's operation of a Chem-Dry® Carpet Cleaning business franchise (the "Business"). In consideration of the mutual promises and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which the parties mutually acknowledge, the parties mutually agree and intend to be legally bound as follows:
EQUIPMENT PURCHASE. Franchisee agrees to purchase from CDI and CDI agrees to sell to Franchisee the tangible equipment listed on the Summary Page on the payment terms set forth in the Schedule. The equipment purchased under this Agreement shall be referred to as the "Equipment." To secure Franchisee's obligations to pay CDI for the Equipment, in the event CDI financed any portion of the purchase of the Equipment, and to dispose of the Equipment in accordance with the Franchise Agreement, Franchisee has granted to CDI the security interest in the Equipment set forth herein.
SHIPMENT, TITLE & RISK OF LOSS. CDI will arrange for shipment of the Equipment on the Schedule to Franchisee. Risk of loss and title to the Equipment transfers to Franchisee upon delivery, subject to any security interest of CDI retained under this Agreement. Franchisee shall inspect each shipment promptly upon receipt and will be deemed to accept the Equipment as conforming to the Schedule unless any defects or deficiencies are noted to CDI within 2 business days after delivery. Franchisee agrees, if no defects or deficiencies are reported within this time period, all sales are final.
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to the 2024 Chem Dry Franchise Disclosure Document, the effective date on the Equipment Purchase Schedule marks the commencement of the agreement between the franchisee and Chem Dry, Inc. (CDI) regarding the purchase of equipment. The Equipment Sales and Security Agreement is effective as of this date. This date is significant because it determines when the franchisee's obligations to purchase the equipment begin and when CDI's obligations to sell the equipment are initiated. It also serves as the starting point for calculating repurchase percentages should CDI repurchase the equipment.
The effective date also triggers the transfer of risk of loss and title to the franchisee upon delivery of the equipment, although CDI retains a security interest in the equipment if it financed any portion of the purchase. The franchisee has a limited time frame of two business days after delivery to inspect the equipment and report any defects or deficiencies to CDI. Failure to report within this period means the franchisee accepts the equipment, and the sale becomes final.
Furthermore, the effective date is relevant to any transfer of the franchise. If a franchisee transfers their Chem Dry business, a written acknowledgement must be delivered to CDI confirming that neither the franchisee, its transferring owners, nor their immediate family members will engage in activities proscribed in Section 16.D for two years, beginning on the transfer's effective date. This date, therefore, has legal and operational implications for the franchisee's relationship with Chem Dry.