How is the remaining future payments discounted to present value calculated for Chesters' Casualty Value?
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' 2025 Franchise Disclosure Document, the Casualty Value is calculated in the event of loss, theft, or destruction of collateral. If the collateral cannot be repaired or is lost, stolen, or suffers a constructive loss under an insurance policy, the franchisee must pay Chesters the Casualty Value.
The Casualty Value is equal to the total of two components: first, any accrued and unpaid amounts that are already due, and second, the remaining future payments. The future payments are discounted to their present value at a rate of 3%. This calculation is made as of the date Chesters receives the Casualty Value.
In practical terms, this means that if a Chesters franchisee's equipment is damaged or stolen, they will not only be responsible for the outstanding payments already due but also the present value of all future payments, discounted at a 3% rate. This could represent a significant financial obligation, so franchisees should ensure they have adequate insurance coverage for the collateral.