Under what circumstances related to bankruptcy or insolvency of the borrower will the entire principal balance of the Remax note, together with all unpaid interest and fees, become immediately due and payable automatically?
Remax Franchise · 2025 FDDAnswer from 2025 FDD Document
(b) Upon the occurrence of any Event of Default, in addition to any other rights and remedies that the Holder may have under applicable law, the entire unpaid principal balance of the Note, together with all accrued and unpaid interest and fees thereon, shall, at the option of the Holder (other than an Event of Default under clause (a)(iv) or (a)(v) above, in which case, the entire principal balance of the Note, together with all unpaid interest and fees thereon, shall become immediately due and payable automatically and without any action of the Holder), become immediately due and payable without further notice, demand, presentation, notice of dishonor, notice of intent to accelerate, notice of acceleration, protest or notice of protest of any kind, all of which are expressly waived by the Borrower.
Source: Item 22 — Contracts (FDD pages 108–334)
What This Means (2025 FDD)
According to Remax's 2025 Franchise Disclosure Document, the entire principal balance of the note, along with all unpaid interest and fees, will automatically become immediately due and payable if an Event of Default occurs under clause (a)(iv) or (a)(v). The document does not specify what constitutes an Event of Default under those clauses.
This means that if certain events related to default, as defined elsewhere in the agreement under clauses (a)(iv) and (a)(v), occur, Remax has the right to demand immediate payment of the entire outstanding balance without needing to provide any prior notice or take any further action. This is a significant risk for the franchisee, as it could lead to immediate financial strain and potential business closure if they are unable to meet this sudden demand for full payment.
Prospective franchisees should carefully review the full loan agreement and Franchise Agreement to fully understand what constitutes an Event of Default under clauses (a)(iv) and (a)(v). Understanding these triggers is crucial for assessing the financial risks associated with the loan and the franchise agreement. It is also important to seek legal counsel to fully understand the implications of these clauses and to negotiate terms that are more favorable, if possible.