What is the procedure for insufficient funds for a Closet Storage Concepts franchisee?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
- 2.4.4 All amounts to be paid by Franchisee to Franchisor and/or its affiliates are currently paid, and no default under this Agreement exists uncured five (5) days after the Franchisee has received written notice of any overdue amounts.
Even if no such default exists, Franchisor may revoke said option and refuse to allow said renewal if, during the initial term of this Agreement, Franchisee has been in material default of this Agreement.
Franchisor and Franchisee agree that, for the purposes of this Section, such material default includes, but is not limited to, failure to make one hundred percent (100%) of all payments and submit reports within fifteen (15) days of the date they are actually due.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
The 2025 Closet Storage Concepts FDD addresses the topic of insufficient funds in the context of renewing the franchise agreement. Specifically, if a franchisee has overdue amounts owed to Closet Storage Concepts or its affiliates, they are considered in default of the agreement. To maintain the option to renew their franchise agreement, the franchisee must pay all outstanding amounts within five days of receiving written notice of the overdue balance.
Even if the franchisee rectifies the overdue payments within the five-day grace period, Closet Storage Concepts retains the right to revoke the renewal option if the franchisee has been in "material default" of the agreement during the initial term. According to the FDD, a material default includes failing to make 100% of all payments and submit required reports within 15 days of the actual due date.
This policy creates a significant incentive for Closet Storage Concepts franchisees to maintain timely payments and financial reporting. Failure to do so not only constitutes a default but also jeopardizes their ability to renew the franchise agreement, even if the outstanding amounts are eventually settled. Prospective franchisees should be aware of these strict financial obligations and ensure they have sufficient capital and financial management systems in place to meet them.