What is the liability 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. |
Source: Item 10 — FINANCING (FDD pages 29–30)
What This Means (2024 FDD)
According to Dryer Vent Squad's 2024 Franchise Disclosure Document, if a franchisee defaults on a financing loan, the liability includes personal responsibility for the amount financed, in addition to interest, collection costs, and legal fees. Furthermore, defaulting on the loan can trigger a default of the Franchise Agreement, potentially leading to the loss of franchise rights in the Dryer Vent Squad business. The franchisor also retains the right to pursue other legal and equitable remedies.
Dryer Vent Squad also requires a personal guarantee from the franchisee and, if the franchisee is a corporation, from each individual owner. To provide additional security, Dryer Vent Squad requires a security agreement related to the assets of the franchised business and the filing of a UCC-1.
Moreover, the franchisee will experience a cross-default of the Franchise Agreement and waive their right to receive notice of default, losing certain legal defenses. This means Dryer Vent Squad can take action against the franchisee without prior notification and the franchisee may have limited recourse. This is a significant risk for franchisees as it accelerates the potential consequences of financial difficulties.
Prospective Dryer Vent Squad franchisees should carefully consider these default terms and seek legal counsel to fully understand the implications before signing any financing agreements. Understanding the extent of personal liability and the potential loss of franchise rights is crucial for assessing the financial risks associated with the franchise.