What happens to the collateral if a Chesters franchisee defaults on their Ascentium loan?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
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If you default, Ascentium may, at its election, accelerate and require that you pay all accrued and unpaid amounts outstanding, and all of the remaining payments due under the financing agreement (discounted to present value at the higher of 3% per annum or the lowest rate allowed by law). Ascentium can also take possession of the collateral, sell it and apply the proceeds against what you owe Ascentium after deducting any costs it incurs. You must also pay Ascentium's costs and expenses, including reasonable attorneys' fees, to enforce the financing agreement. If you make a payment late you must pay Ascentium a late charge of 10% of the payment amount (not to exceed the highest rate allowed by applicable law). Ascentium may charge you a return check or return ACH charge of $30 for any payment which is returned by your bank for any reason (not to exceed the maximum amount permitted by law).
You must insure the collateral, at your cost, against all loss during the term of the loan. If you fail to satisfy your insurance obligations, Ascentium may obtain insurance on its collateral and you must pay Ascentium all charges for obtaining the insurance including its administrative fees.
Source: Item 10 — FINANCING (FDD pages 23–24)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, if a franchisee defaults on their Ascentium loan, Ascentium has several options. Ascentium can accelerate the loan and demand immediate payment of all outstanding amounts, including remaining payments discounted to present value at a rate of either 3% per annum or the lowest rate allowed by law, whichever is higher. This means Chesters franchisees could be required to pay the entire loan balance immediately upon default.
Additionally, Ascentium can take possession of the collateral securing the loan. After taking possession, Ascentium can sell the collateral and use the proceeds to offset the outstanding debt, after deducting any costs incurred during the process. The franchisee is responsible for covering Ascentium's costs and expenses related to enforcing the financing agreement, including reasonable attorney's fees. This could add significant financial burden on a defaulting Chesters franchisee.
The FDD also specifies several events that constitute a default on the loan. These include failing to make timely payments, insolvency of the franchisee or any guarantor, filing for bankruptcy, making an assignment for the benefit of creditors, admitting inability to pay debts, terminating business existence, breaching any agreement with Ascentium, or merging, consolidating, or selling the business without Ascentium's written consent. Any of these events could trigger the actions described above, potentially leading to the loss of collateral and significant financial liabilities for the Chesters franchisee.