Who is responsible for paying the costs of enforcing the security interest for an All Team franchise?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) Payment of Costs.
Debtor shall pay all costs incurred by Secured Party in obtaining, perfecting, and enforcing the security interest created by this Agreement and in collecting the Liabilities and preserving the Collateral, including: attorneys' fees, costs, and expenses; costs and expenses of collection efforts by Debtor's employees; taxes, assessments, insurance premiums, and indebtedness secured by a Lien on the Collateral; and the cost of repossessing, taking, removing, storing, repairing, altering, renovating, registering, and selling any of the Collateral and any property to which the Collateral is affixed or attached.
In this Agreement, the term "costs" includes all internal expenses as well as expenses and attorneys' fees incurred in all matters of interpretation and enforcement, before, during, and after demand, suit, proceeding,
trial, appeal, and post-judgment efforts as well as efforts in bankruptcy, reorganization, or similar proceedings.
Source: Item 22 — CONTRACTS (FDD pages 33–34)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, the Debtor, which refers to the franchisee, is responsible for paying all costs incurred by the Secured Party (All Team Franchise Corporation) in obtaining, perfecting, and enforcing the security interest. These costs include attorneys' fees, costs, and expenses; costs and expenses of collection efforts by the franchisee's employees; taxes, assessments, insurance premiums, and indebtedness secured by a Lien on the Collateral; and the cost of repossessing, taking, removing, storing, repairing, altering, renovating, registering, and selling any of the Collateral and any property to which the Collateral is affixed or attached.
This means that if All Team needs to take legal action to protect its security interest in the franchise, the franchisee will be responsible for covering all associated expenses. This includes not only external costs like attorney fees and court expenses but also internal costs related to collection efforts made by the franchisee's own employees. The franchisee is also responsible for expenses related to the collateral, such as taxes, insurance, and any costs associated with repossessing or selling the collateral.
The agreement specifies that the term "costs" includes all internal expenses as well as expenses and attorneys' fees incurred in all matters of interpretation and enforcement, before, during, and after demand, suit, proceeding, trial, appeal, and post-judgment efforts as well as efforts in bankruptcy, reorganization, or similar proceedings. This broad definition of costs means the franchisee's financial responsibility extends to a wide range of potential legal and recovery actions All Team might undertake.
This arrangement is not uncommon in franchising, as franchisors often seek to protect their investment and brand standards by ensuring franchisees bear the costs of enforcement actions. Prospective All Team franchisees should carefully consider this financial responsibility and factor it into their business planning and risk assessment.