In the event of termination, are Dryer Vent Squad Franchisee's Owners liable for the franchisee's obligations?
Dryer_Vent_Squad Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisor, in addition to any and all other rights and remedies available to Franchisor as set forth in this Agreement, and, at law and in equity, shall possess the following rights and remedies, each of which are not exclusive of the other and may be/are in conjunction with one another:
- (1) To void and terminate this Agreement, and thereafter to market, sell, transfer, convey and assign the rights granted to Franchisee under this Agreement to any other person or entity in Franchisor's sole discretion and without compensation to Franchisee.
- (2) To hold Franchisee and Franchisee's Owners liable for, and recover from each of them, jointly and severally, all payments, fees, monetary obligations, financial obligations, interest, and charges due and owing to Franchisor from Franchisee pursuant to this Agreement, the Ancillary Agreements, and/or any other agreements between Franchisee and Franchisor, including, without limitation, Royalty Fees and Advertising Contributions with each and every payment and obligation to be accelerated and due immediately.
- (3) To hold Franchisee and Franchisee's Owners liable for, and recover from each of them, jointly
and severally, lost revenues, profits, and fees including, but not limited to Royalty Fees, Brand Development Fund Fee, Advertising Contributions, and all other fees, revenues and/or expenses that would have been paid to Franchisor, under the terms of this Agreement and throughout the Term of this Agreement, had a breach not occurred and had Franchisor not terminated this Agreement. In calculating and determining the foregoing, Franchisee agrees that in calculating and in determining such damages that it is fair and reasonable to use Franchisee's most recent calendar year Gross Sales in calculating and determining Franchisor lost revenues and fees and by assuming that such Gross Sales would have been earned in each and every year throughout the remainder of the Term had this Agreement not been terminated.
Source: Item 23 — RECEIPTS (FDD pages 51–207)
What This Means (2024 FDD)
According to Dryer Vent Squad's 2024 Franchise Disclosure Document, in the event of termination of the franchise agreement, both the franchisee and the franchisee's owners can be held liable for the franchisee's obligations. Specifically, Dryer Vent Squad has the right to recover all payments, fees, monetary obligations, financial obligations, interest, and charges due from both the franchisee and the franchisee's owners. This includes, but is not limited to, Royalty Fees and Advertising Contributions, which are accelerated and due immediately upon termination.
Dryer Vent Squad can also hold the franchisee and their owners liable for lost revenues, profits, and fees that the franchisor would have received had the breach not occurred and the agreement not been terminated. This includes Royalty Fees, Brand Development Fund Fees, Advertising Contributions, and all other fees and expenses. To calculate these damages, Dryer Vent Squad may use the franchisee's most recent calendar year Gross Sales or, if the business has been open for less than a year, an average of Dryer Vent Squad Business Gross Sales across the system during the year of termination. These gross sales figures are then projected over the remaining term of the agreement to determine the total lost revenues and fees.
This clause essentially means that if a Dryer Vent Squad franchise is terminated, the franchisor can pursue both the business entity and the individuals who own it for all outstanding debts and future lost profits. This is a significant point for prospective franchisees to consider, as it extends personal financial risk beyond the business itself. The FDD states that Franchisee and each Owner shall remain liable for all obligations to Franchisor set forth in this Agreement.
It is important for potential Dryer Vent Squad franchisees to fully understand the implications of this clause and to seek legal counsel to assess the extent of their personal liability in the event of a franchise termination. Understanding the conditions under which termination can occur and the methods used to calculate damages is crucial for making an informed investment decision.