If a 1-800-GOT-JUNK? franchisee fails to pay the lessor of a vehicle, can the franchisor terminate the agreement?
1_800_Got_Junk Franchise · 2025 FDDAnswer from 2025 FDD Document
SCHEDULE B
This is Schedule B to a General Security Agreement
Between
1-800-GOT-JUNK?
LLC, a Delaware limited liability company and
[DEBTOR]
Permitted Encumbrances:
Purchase Money Security Interests held by the lessors or creditors pursuant to Vehicle Leases (as that term is defined in the Franchise Agreement): (i) encumbering no more than the minimum number of Vehicles required under the Franchise Agreement, and (ii) only encumbering the particular Vehicle, and no other property of Debtor.
Source: Item 22 — Contracts (FDD page 24)
What This Means (2025 FDD)
Based on the 2025 1-800-GOT-JUNK? Franchise Disclosure Document, the General Security Agreement includes a schedule that addresses vehicle leases. Schedule B states that permitted encumbrances include "Purchase Money Security Interests held by the lessors or creditors pursuant to Vehicle Leases." These leases (i) can encumber no more than the minimum number of Vehicles required under the Franchise Agreement, and (ii) can only encumber the particular Vehicle, and no other property of the Debtor.
While this section acknowledges the existence of vehicle leases, it does not explicitly state whether 1-800-GOT-JUNK? can terminate the franchise agreement if a franchisee fails to pay the vehicle lessor. The document outlines permitted encumbrances related to vehicle leases, suggesting that such leases are a normal part of operations.
A prospective 1-800-GOT-JUNK? franchisee should seek clarification from the franchisor regarding the specific consequences of failing to meet lease obligations, as this is not detailed in the provided excerpts. Understanding the franchisor's policies on this matter is crucial for assessing the financial risks associated with the franchise.