What does the grant of a security interest entail for an All Team franchisee?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
FRANCHISEE shall not grant a security interest, pledge, or place a lien upon FRANCHISEE's Interest in this Agreement or in the Agency or in the assets used in the business, except that FRANCHISEE shall be permitted to grant a security interest in such furniture, fixtures, and equipment to secure FRANCHISEE's obligation to the seller of or lender for such furniture, fixtures, and equipment to secure any indebtedness relating to the business and FRANCHISEE shall be permitted to assign its accounts receivable in connection with any third party financing of employee payroll subject to prior written approval of ATFC.
Source: Item 22 — CONTRACTS (FDD pages 33–34)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, franchisees are generally restricted from granting security interests or liens on their franchise interest, agency, or business assets. However, there are exceptions to this rule.
An All Team franchisee is permitted to grant a security interest in furniture, fixtures, and equipment to secure obligations to the seller or lender of those items. This allows franchisees to finance the purchase of essential business equipment. Additionally, franchisees can assign their accounts receivable to a third party for employee payroll financing, but this requires prior written approval from All Team.
These limitations and allowances are typical in franchising, as franchisors like All Team seek to maintain control over the franchise and its assets while still allowing franchisees some flexibility in financing their operations. Franchisees should seek approval when needed and carefully document all financial arrangements to ensure compliance with the franchise agreement.