How does the Secured Party apply the proceeds from the disposition of Collateral for a Deck Medic franchise?
Deck_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
- (b) Secured Party may apply the proceeds of any disposition of Collateral available for satisfaction of Debtor's indebtedness, which shall include the reasonable expenses of such sale, in any order of preference that Secured Party, chooses in its sole discretion. Debtor shall remain liable for any deficiency.
Source: Item 23 — RECEIPTS (FDD pages 43–228)
What This Means (2024 FDD)
According to Deck Medic's 2024 Franchise Disclosure Document, the Secured Party (Deck Medic, Inc.) has the right to use proceeds from disposing of the Collateral to cover the Debtor's (franchisee) outstanding debts. This includes the reasonable expenses incurred during the sale or disposition of the collateral. The order in which these proceeds are applied is at the sole discretion of Deck Medic.
This means that if a Deck Medic franchisee defaults on their obligations, Deck Medic can seize the assets used as collateral, sell them, and use the money to pay off what the franchisee owes. The franchisee is responsible for covering any remaining deficiency if the sale of the collateral does not fully satisfy the debt.
This clause protects Deck Medic in case of franchisee default, ensuring they can recover losses. However, it also places a significant risk on the franchisee, who could lose their assets and still owe money to Deck Medic if the collateral's value is less than the outstanding debt. Franchisees should carefully consider this risk and ensure they understand their obligations under the Security Agreement.