How are amounts received from Chesters applied under the EFA?

According to Chesters's 2025 Franchise Disclosure Document, any amounts received under the Equipment Financing Agreement (EFA) will be applied to the franchisee's outstanding obligations to Chesters as Chesters determines. This gives Chesters broad discretion in how they allocate payments received from the franchisee.

This means Chesters can decide which specific debts or obligations the payments will cover. For example, they could apply payments to outstanding fees, taxes, insurance premiums, or any other costs the franchisee owes under the EFA. This discretion could be used to the benefit of Chesters, potentially prioritizing payments towards items that accrue higher interest or penalties.

For a prospective Chesters franchisee, this clause highlights the importance of understanding all potential obligations under the EFA and maintaining open communication with Chesters regarding payment allocations. Franchisees should carefully track their payments and outstanding balances to ensure they align with Chesters's records and to address any discrepancies promptly. It is also important to note that the EFA grants Chesters a security interest in the collateral, meaning they have a legal claim to the equipment and proceeds to secure the franchisee's obligations.