What legal rights are lost upon default of a Dryer Vent Squad financing loan?
Dryer_Vent_Squad Franchise · 2024 FDDAnswer from 2024 FDD Document
| Finance Type | e | Operating Territory Type: Single Territory | Operating Territory Type: Double Territory | |
|---|---|---|---|---|
| Amount Financed | Up to $14,000 of Initial Franchise Fee | Up to $28,000 of Initial Franchise Fee | ||
| Down Payment | Minimum of $21,000 | Minimum of $42,000 | ||
| Term | Up to two (2) years | Up to two (2) years | ||
| Finance Charges | Ten percent (10%) APR | Ten percent (10%) APR | ||
| Payment Amount | Depends on amount financed with repayment self-amortized over two (2) year repayment period with monthly installments of principal and interest paid monthly. | |||
| Payment Terms | Payable monthly over two (2) year repayment period with monthly installments of principal and interest paid monthly. No early pre-payment penalty. | |||
| Security Required | Personal guaranty by you and if you are a Corporate Entity then personal guaranty by each individual owner. Additional security in the form of a security agreement related to the assets of the Franchised Business and the filing of a UCC-1. | |||
| Liability Upon Default | Personal liability for the amount financed, plus interest, collection costs and legal fees. Additionally, default of Franchise Agreement and loss of franchise rights in the Franchised Business and other legal and equitable remedies available to us. | |||
| Loss of Legal Rights on Default | Cross-default of Franchise Agreement. Waiver of notice of default and loss of defenses | |||
| Referral Fee | Not applicable. | If you fail to repay your loan, we have the right to terminate your franchise and acquire the rights to operate your Dryer Vent Squad Business directly. We may, in our sole discretion, offer financing to new and existing franchisees who wish to expand with additional Territories. Note payments are not refundable. Note obligations are not refundable. If, at your request, we elect to make financing available to you, you must sign the Note at the time you sign the Franchise Agreement. A copy of the form Note is attached as Exhibit 7 to the Franchise Agreement. |
Under the Note terms, you will be waiving legal rights that include a waiver of your right to receive notices of default and other legal rights and defenses, including your right to diligence, demand, presentment for payment, notice of nonpayment and protest, and notice of amendments or modifications. You also waive any defense under the statute of limitations and allow that a confessed judgment may be taken against you.
Source: Item 10 — FINANCING (FDD pages 29–30)
What This Means (2024 FDD)
According to Dryer Vent Squad's 2024 Franchise Disclosure Document, a franchisee who defaults on a financing loan from Dryer Vent Squad loses certain legal rights. Specifically, the franchise agreement will be cross-defaulted, meaning a default on the loan automatically triggers a default on the franchise agreement itself. The franchisee also waives their right to receive notice of default, meaning Dryer Vent Squad is not obligated to inform the franchisee before taking action due to the default.
Furthermore, the franchisee loses certain legal defenses they might otherwise have. This waiver of defenses could significantly limit the franchisee's ability to contest Dryer Vent Squad's actions in the event of a dispute. These terms are part of the Note that the franchisee signs when accepting financing from Dryer Vent Squad.
The FDD also states that under the Note terms, franchisees waive rights such as diligence, demand, presentment for payment, notice of nonpayment and protest, and notice of amendments or modifications. They also waive any defense under the statute of limitations and allow that a confessed judgment may be taken against them. This means that Dryer Vent Squad can obtain a judgment against the franchisee without a full trial or hearing, which is a significant disadvantage for the franchisee. While Dryer Vent Squad states they have no plans to sell or assign any Note from the franchisee to a third party, they have the right to do so in the future.