Under the Chesters EFA, what is the secured party agreeing to lend to Chesters?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
You irrevocably instruct us to pay the Supplier on your behalf, which payment is the funding of our loan to you.
The Financed Amount is based upon the total estimated cost of the Collateral and financed Soft Costs (adjusted for any non-reimbursed down payments made by you) (the "Estimated Cost"), which Estimated Cost you and/or the Supplier have provided to us.
If the final actual cost of the Collateral and any financed Soft Costs that we pay the Supplier and any taxing authority (the "Actual Cost") is different than the Estimated Cost, you authorize us to adjust the Financed Amount to the Actual Cost.
If we request, you agree to execute a document reflecting such adjustments and we will provide you with evidence of our cost changes requiring such adjustments if you request.
You represent and warrant to us that all information conveyed to us in connection with this EFA and all related documents whether by you, a guarantor, the Supplier or any other person, is true, accurate, complete and not misleading.
Source: Item 23 — **RECEIPTS (FDD pages 48–197)
What This Means (2025 FDD)
According to Chesters' 2025 Franchise Disclosure Document, the secured party under the Equipment Finance Agreement (EFA) is essentially providing a loan to the franchisee, which Chesters then uses to pay the supplier for the collateral (equipment) and any financed soft costs. The "Financed Amount" is based on the total estimated cost of the collateral and soft costs, adjusted for any down payments made by the franchisee. This arrangement allows Chesters to acquire necessary equipment without paying the full amount upfront, instead making payments to the secured party over time.
If the final actual cost of the collateral and soft costs differs from the initial estimate, Chesters authorizes the secured party to adjust the financed amount accordingly. This ensures that the loan accurately reflects the actual expenses incurred. Chesters represents and warrants that all information provided in connection with the EFA is true, accurate, and complete. This protects the secured party by ensuring they have reliable information on which to base the financing.
Chesters also irrevocably instructs the secured party to pay the supplier on their behalf, which constitutes the funding of the loan. This direct payment mechanism simplifies the transaction and ensures that the supplier receives payment promptly. Overall, the EFA outlines a structured financing arrangement where the secured party provides funds for equipment and related costs, with Chesters responsible for repayment and adherence to the terms of the agreement.