What is included in the Collateral that the Debtor grants a security interest in to 1-800-GOT-JUNK? under the General Security Agreement?
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)
According to 1-800-GOT-JUNK?'s 2025 Franchise Disclosure Document, the Debtor grants a security interest to the Secured Party as security for the payment and performance of the Obligations. The collateral includes all of the Debtor's present and after-acquired goods, securities, instruments, documents of title, chattel paper, licenses, intangibles, and money. This collateral must be located on, relating to, or arising in connection with a Franchised Business. It specifically includes all vehicles, equipment, and accessories, as well as all proceeds from these items, regardless of their location.
In simpler terms, 1-800-GOT-JUNK? requires franchisees to provide a security interest in virtually all assets connected to the franchise business. This gives 1-800-GOT-JUNK? a legal claim on these assets if the franchisee fails to meet their financial or contractual obligations. The scope of the collateral is broad, covering not only tangible items like trucks and equipment but also intangible assets like licenses and accounts receivable.
This arrangement protects 1-800-GOT-JUNK? by ensuring they have recourse to recover losses if a franchisee defaults. However, it also means that a franchisee's business assets are encumbered, which could affect their ability to obtain financing from other sources or sell the business without 1-800-GOT-JUNK?'s consent. Prospective franchisees should carefully consider the implications of granting such a comprehensive security interest and seek legal advice to fully understand their rights and obligations under the General Security Agreement.
The security interest also acts as a purchase money security interest to the extent that any of the Obligations are monies advanced by 1-800-GOT-JUNK? to enable the Debtor to purchase or otherwise acquire any of the Collateral and were so used. A certificate of an officer of 1-800-GOT-JUNK? as to the extent that the Obligations are monies so advanced shall be prima facie proof of the purchase money security interest created hereby.