When Spray Net exercises step-in rights, what costs is the franchisee required to reimburse Spray Net for?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
In the event Franchisor exercises these "step-in rights," Franchisee must (a) pay Franchisor a management fee amounting to eight percent (8%) of the Gross Sales of the Franchised Business during the time period that Franchisor's representatives are operating the Franchised Business (the "Management Fee"), and (b) reimburse Franchisor for all reasonable costs and overhead that Franchisor incurs in connection with its operation of the Franchised Business, including without limitation, costs of personnel supervising and staffing the Franchised Business and any travel, lodging and meal expenses.
If Franchisor undertakes to operate the Franchised Business under this Section, Franchisee must indemnify, defend and hold Franchisor (and its representatives and employees) harmless from and against any Claims that may arise out of Franchisor's operation of the Franchised Business.
Source: Item 23 — RECEIPTS (FDD pages 75–219)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, if Spray Net exercises its "step-in rights" to operate the franchised business, the franchisee is responsible for specific financial obligations. These include paying Spray Net a management fee equivalent to eight percent (8%) of the franchised business's gross sales during the period Spray Net's representatives are operating the business. This fee compensates Spray Net for overseeing the business during the step-in period.
In addition to the management fee, the franchisee must reimburse Spray Net for all reasonable costs and overhead incurred while operating the franchised business. These costs encompass personnel expenses for supervising and staffing the business, as well as any travel, lodging, and meal expenses incurred by Spray Net's personnel. This ensures that Spray Net is compensated for the direct expenses associated with managing the franchise during the period they are exercising their step-in rights.
Furthermore, the franchisee is obligated to indemnify, defend, and hold Spray Net (including its representatives and employees) harmless from any claims arising from Spray Net's operation of the franchised business during this period. This means the franchisee is responsible for protecting Spray Net from any legal liabilities or damages that may occur as a result of their management of the business. This comprehensive allocation of costs and liabilities ensures that Spray Net is fully compensated and protected when it steps in to operate a franchise.