Does the 1-800-GOT-JUNK? General Security Agreement specify any requirements for the 'customary sales terms' when selling collateral?
1_800_Got_Junk Franchise · 2025 FDDAnswer from 2025 FDD Document
II - SECURITY INTEREST 2.1 As general and continuing security for the payment and performance of the Obligations, the Debtor hereby grants to the Secured Party a security interest in, and assigns, charges, mortgages and pledges to and in favour of the Secured Party, all of the Debtor's present and after acquired goods, securities, instruments, documents of title, chattel paper, licenses, intangibles and money located on, relating to or arising in connection with a Franchised Business (as defined in the Franchise Agreement) including, without limitation, all vehicles, equipment and accessories and all proceeds from the foregoing wheresoever situate (collectively, the "Collateral"). 2.2 The security interest created hereby shall be a purchase money security interest to the extent that any of the Obligations are monies advanced by the Secured Party to enable the Debtor to purchase or otherwise acquire any of the Collateral and were so used and, without limitation, a certificate of an officer of the Secured Party as to the extent that the Obligations are monies so advanced shall be prima facie proof of the purchase money security interest created hereby.
Source: Item 22 — Contracts (FDD page 24)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the excerpts provided do not contain specific details about the requirements for 'customary sales terms' when 1-800-GOT-JUNK? sells collateral under the General Security Agreement. The excerpts do outline the agreement's purpose, which is to secure the franchisee's obligations to 1-800-GOT-JUNK?, and describe the collateral as the franchisee's assets related to the franchised business, including vehicles and equipment. The document also mentions the security interest created is a purchase money security interest to the extent that 1-800-GOT-JUNK? advanced monies to enable the Debtor to purchase or otherwise acquire any of the Collateral and were so used. However, the documents do not specify the conditions or terms that would apply if 1-800-GOT-JUNK? were to sell the collateral.
A prospective 1-800-GOT-JUNK? franchisee should seek clarification from the franchisor regarding the specific procedures and requirements related to the sale of collateral under the General Security Agreement. This includes understanding what constitutes 'customary sales terms,' how the sale price is determined, and what rights the franchisee has in the event of such a sale.
Understanding these terms is crucial for a franchisee to assess the potential financial risks and obligations associated with the General Security Agreement. Without this information, a franchisee may be unaware of the potential implications if 1-800-GOT-JUNK? needs to liquidate the collateral to cover outstanding debts or obligations.