What is the liability upon default for Dryer Vent Squad financing?
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. |
Source: Item 10 — FINANCING (FDD pages 29–30)
What This Means (2024 FDD)
According to Dryer Vent Squad's 2024 Franchise Disclosure Document, if Dryer Vent Squad offers direct financing for the initial franchise fee and a franchisee defaults, the franchisee is personally liable for the amount financed, plus interest, collection costs, and legal fees. This applies to both single and double territory franchise options.
In addition to the financial liabilities, defaulting on the financing agreement also constitutes a default of the Franchise Agreement itself. This can lead to the loss of franchise rights in the Dryer Vent Squad business. Dryer Vent Squad also retains the right to pursue other legal and equitable remedies available to them.
Furthermore, the franchisee will experience a cross-default of the Franchise Agreement and a waiver of notice of default, resulting in a loss of defenses. For a single territory, Dryer Vent Squad may finance up to $14,000 of the initial franchise fee, while for a double territory, they may finance up to $28,000. In both cases, the financing term is up to two years with a 10% APR. The security required includes a personal guaranty from the franchisee and, if the franchisee is a corporate entity, a personal guaranty from each individual owner, along with a security agreement related to the assets of the franchised business and the filing of a UCC-1.
Prospective franchisees should carefully consider these terms and understand the full extent of their financial and legal obligations before entering into a financing agreement with Dryer Vent Squad. It is advisable to seek legal counsel to fully understand the implications of these clauses.