To what items are payments from a Christian Brothers Automotive tenant applied first?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
4.04 Application of Funds. If Franchisee is delinquent in the payment of any obligation to
Franchisor, its subsidiaries, affiliates or designees, then Franchisor (or such subsidiaries,
affiliates or designees), will have the right to apply any payment from Franchisee to any
obligation due, including the oldest obligation due, whether under this Agreement or
otherwise, notwithstanding any contrary designation by Franchisee as to such application.
Source: Item 23 — RECEIPTS (FDD pages 76–372)
What This Means (2025 FDD)
According to the 2025 Christian Brothers Automotive Franchise Disclosure Document, if a franchisee is behind on any payments, Christian Brothers Automotive has the right to apply any payment from the franchisee to any outstanding obligation. This includes the oldest obligation due, regardless of whether the obligation is under the Franchise Agreement or any other agreement. This is irrespective of any specific designation the franchisee might have made regarding how the payment should be applied.
This policy is significant for prospective franchisees as it gives Christian Brothers Automotive considerable control over how payments are allocated when a franchisee has multiple outstanding debts. It means that even if a franchisee intends a payment to cover a specific, more recent invoice, Christian Brothers Automotive can instead apply it to an older, perhaps more problematic, debt.
For a franchisee experiencing financial difficulties, this could lead to a situation where current obligations continue to accrue late fees and penalties while older debts are being addressed. Franchisees need to be aware of this clause and maintain open communication with Christian Brothers Automotive regarding payment allocations, especially if they anticipate any challenges in meeting their financial obligations. This is a fairly standard clause in franchise agreements, designed to protect the franchisor's financial interests and ensure all debts are managed effectively.