If a Dryject franchisee provides financing to the transferee, what must they agree to?
Dryject Franchise · 2025 FDDAnswer from 2025 FDD Document
- (x) If You are providing financing to the proposed transferee for any part of the purchase price, You have agreed that all of the proposed transferee's obligations under promissory notes, agreements or security interests reserved in the Franchised Business are subordinate to the proposed transferee's obligation to pay fees and other amounts due to Us and otherwise to comply with the franchise agreement; and,
Source: Item 8 — BUSINESS RELATIONSHIP (FDD pages 68–229)
What This Means (2025 FDD)
According to Dryject's 2025 Franchise Disclosure Document, if a franchisee provides financing to a transferee for any part of the purchase price, the franchisee must agree that all of the transferee's obligations under promissory notes, agreements, or security interests are subordinate to the transferee's obligation to pay fees and other amounts due to Dryject. The obligations must also comply with the franchise agreement.
This means that Dryject will be in a superior position to collect fees and other amounts owed to them by the transferee, even if the franchisee is providing financing. This protects Dryject's revenue stream and ensures that the financial health of the franchise system is prioritized.
For a franchisee considering providing financing, this subordination clause represents a significant risk. If the transferee defaults, Dryject will be paid first, potentially leaving the franchisee with little to no recovery on their loan. Franchisees should carefully consider the financial stability of the transferee and the terms of the financing agreement before offering financing, as Dryject's interests are legally prioritized.