What is the 'Casualty Value' that I might owe Chesters if the collateral is lost or destroyed?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
If damage of any kind occurs to any item of Collateral, you, at our option, shall at your expense (a) place the Collateral in good repair, condition or working order, or (b) if the Collateral cannot be repaired or is lost, stolen or suffers a constructive loss under an insurance policy covering the Collateral, pay to us the "Casualty Value." The Casualty Value will be equal to the total of (i) accrued and unpaid amounts then due and owing, and (ii) the remaining future Payments discounted to present value at 3%, in both cases as of the date the Casualty Value is received by us.
Source: Item 23 — **RECEIPTS (FDD pages 48–197)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, if any collateral is damaged, lost, or destroyed, you may be required to pay Chesters the "Casualty Value." This Casualty Value is calculated as the sum of two components: first, all accrued and unpaid amounts that you already owe at the time of the loss; and second, the total of all remaining future payments, but discounted to their present value at a rate of 3%. This calculation is made as of the date Chesters receives the Casualty Value payment.
In practical terms, this means that if equipment you financed through Chesters is damaged beyond repair or is stolen, you are responsible for not only the payments you have missed but also a discounted value of all the payments you would have made in the future. The 3% discount provides a small reduction to account for the time value of money, but you are still obligated to cover the bulk of the remaining financial obligation.
This provision highlights the importance of maintaining adequate insurance on all collateral, as Chesters requires you to do. The insurance should cover potential losses to protect you from having to pay the Casualty Value out of pocket. Franchisees should carefully review their insurance policies to ensure they adequately cover potential losses and meet Chesters's requirements, as specified in the franchise agreement.