Is pledging the 7 Brew franchise agreement as security considered a 'transfer'?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
st) in the Store's assets (including its physical structure but not including this Agreement or the franchise rights) to a lender that finances your acquisition, development, and/or operation of the Store without having to obtain our prior written approval as long as you give us ten (10) days' prior written notice. This Agreement and the franchise rights granted to you by this Agreement may not be pledged as collateral or be the subject of a security interest, lien, levy, attachment, or execution by your creditors or any financial institution. Any security interest that may be created in this Agreement by virtue of Section 9-408 of the Uniform Commercial Code is limited as described in Section 9-408(d) of the Uniform Commercial Code.
**C.
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, the franchise agreement and the franchise rights it grants cannot be pledged as collateral. They also cannot be subject to a security interest, lien, levy, attachment, or execution by creditors or financial institutions.
However, a 7 Brew franchisee can grant a security interest in the store's assets (including its physical structure but not the franchise agreement itself) to a lender without 7 Brew's prior approval. The franchisee must give 7 Brew ten days' prior written notice before doing so. This allowance is only for financing the acquisition, development, or operation of the store.
This restriction protects 7 Brew by preventing franchisees from using the franchise agreement itself as a guarantee for their debts. This ensures that the franchise remains with the approved franchisee unless 7 Brew consents to a full transfer, maintaining control over who operates under their brand. It also allows franchisees to obtain financing using their physical assets, which is a common practice.