What is an All Team franchisee required to do if a third party claims an interest in the collateral?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
Debtor covenants that it will not pledge the Collateral to any Person other than Secured Party, that the Collateral will remain free of all Liens except those permitted by Secured Party, and that Debtor will defend the Collateral against the claims and demands of all Persons at any time claiming an interest in the Collateral.
Source: Item 22 — CONTRACTS (FDD pages 33–34)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, if a third party claims an interest in the collateral, the franchisee, referred to as the Debtor in this context, is obligated to defend the collateral against those claims. This means the franchisee must take necessary actions to protect the collateral from any demands or legal challenges made by the third party.
This requirement is part of the broader representations, warranties, and covenants that the franchisee makes to the Secured Party, which is All Team. The franchisee must ensure that the collateral remains free of all liens, except those explicitly permitted by All Team. This obligation underscores the franchisee's responsibility to maintain clear title and protect the assets used in the business from potential claims by outside parties.
In practical terms, if a third party asserts a claim against the collateral, the All Team franchisee would need to engage legal counsel to defend against the claim. Failure to do so could result in a breach of the franchise agreement and potential loss of the collateral. This requirement highlights the importance of due diligence and careful management of the franchise's assets to avoid any disputes or claims that could jeopardize the business's financial stability.