After termination of a Cinch I.T. franchise, who is responsible for collecting accounts receivable?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
- (x) Assign any and all accounts receivable to Us for collection.
In connection therewith You hereby appoint Us as attorney-in-fact to engage in such collection activities following the termination or expiration of this Agreement and You specifically undertake to refrain from engaging in any such collection activities upon termination or expiration.
We agree to employ good faith efforts, including, where appropriate in Our sole and exclusive judgment, the commencement of legal proceedings, to collect such accounts receivable.
Nothing contained herein shall be construed or deemed to impose any duty or obligation upon Us to collect such accounts receivable and, if all or a portion of such accounts receivable are not collected by Us, You release and waive any claims thereto against Us.
Source: Item 23 — RECEIPTS (FDD pages 60–269)
What This Means (2024 FDD)
According to the 2024 Cinch I.T. Franchise Disclosure Document, upon termination or expiration of the franchise agreement, the franchisee must assign all accounts receivable to Cinch I.T. for collection. The franchisee also appoints Cinch I.T. as their attorney-in-fact to engage in collection activities and must not engage in any collection activities themselves after termination or expiration.
Cinch I.T. agrees to employ good faith efforts to collect the accounts receivable, including commencing legal proceedings if deemed appropriate. However, the FDD clarifies that Cinch I.T. is not obligated to collect these accounts.
The document states that if Cinch I.T. does not collect all or a portion of the accounts receivable, the franchisee releases and waives any claims against Cinch I.T. regarding the uncollected amounts. If Cinch I.T. is successful in collecting the receivables, they will remit the collected sums to the franchisee after deducting any monies owed to Cinch I.T. and its affiliates, the pro rata cost of servicing the client, and Cinch I.T.'s costs of collection. The franchisee must also immediately refrain from contacting clients or former clients of the franchised business.