Does Hydrodog have the discretion to apply payments to past due debts?

According to Hydrodog's 2025 Franchise Disclosure Document, Hydrodog has the authority to allocate a franchisee's payments towards any outstanding debts owed to them. Specifically, Hydrodog retains sole discretion in how payments are applied, regardless of any specific designations a franchisee might attempt to make. This means that even if a franchisee intends a payment to cover a current royalty or fee, Hydrodog can instead apply that payment to older, overdue balances.

This provision is important for prospective Hydrodog franchisees to understand, as it gives Hydrodog significant control over the application of payments. Franchisees need to be meticulous in keeping their accounts current to avoid having payments redirected to past debts, potentially leading to late fees or other penalties on current obligations.

Furthermore, Hydrodog also has the right to offset any amounts they may owe to a franchisee against any debts the franchisee owes to Hydrodog or its affiliates. This includes, but is not limited to, royalties, marketing fund fees, late payment fees, and interest on late payments. Hydrodog will notify the franchisee monthly if they elect to exercise this offset right. This ability to offset payments provides Hydrodog with additional financial control and recourse in managing franchisee accounts.

In summary, while such provisions are not uncommon in franchising, Hydrodog franchisees must maintain diligent financial records and communication with Hydrodog to ensure proper payment allocation and avoid potential financial repercussions from Hydrodog's discretionary application of payments.