Are the Owners of the Dryer Vent Squad Franchisee jointly and severally liable for the franchisee's obligations?
Dryer_Vent_Squad Franchise · 2024 FDDAnswer from 2024 FDD Document
[Item 23: RECEIPTS]
- (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. If, however, the Franchised Business has been open and in operation for less than one calendar year, Franchisee agrees that it is fair and reasonable to use an average of Dryer Vent Squad Business Gross Sales across the System during the year in which this Agreement was terminated and to use such average Gross Sales for the purpose of calculating and determining Franchisor lost revenues and fees and, in doing so, 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. Franchisee agrees that the foregoing is a form of liquidated damages, and that it is fair and reasonable.
Source: Item 23 — RECEIPTS (FDD pages 51–207)
What This Means (2024 FDD)
According to Dryer Vent Squad's 2024 Franchise Disclosure Document, the franchisee's owners can be held jointly and severally liable for the franchisee's obligations. Specifically, if Dryer Vent Squad terminates the franchise agreement, it can hold both the franchisee and the franchisee's owners liable for all payments, fees, monetary obligations, financial obligations, interest, and charges owed to Dryer Vent Squad. This includes, but is not limited to, royalty fees and advertising contributions, with all payments accelerated and due immediately.
Furthermore, Dryer Vent Squad can hold the franchisee and its owners jointly and severally liable for lost revenues, profits, and fees that Dryer Vent Squad 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. The FDD specifies a method for calculating these damages, using 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.
This "joint and several liability" clause is a significant point for prospective Dryer Vent Squad franchisees. It means that each owner is individually responsible for the entire debt or obligation. If one owner cannot pay, the others must cover the full amount. This clause is designed to protect Dryer Vent Squad's financial interests in case of a breach or termination of the franchise agreement. Franchisees should carefully consider the implications of this clause and seek legal advice to fully understand their obligations and potential liabilities.