Under the All Team agreement, what constitutes a 'Default'?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) Events of Default.
Debtor agrees that the occurrence of any of the following events shall constitute a Default hereunder: (i) subject to any applicable notice or cure periods, the failure of Debtor to pay at maturity, or at any accelerated maturity, any of the Liabilities to Secured Party; (ii) the breach or failure to perform by Debtor any obligation, covenant, promise or agreement contained in this Agreement, and Debtor's failure to cure such breach or failure within fifteen (15) days after written notice thereof from Secured Party, or the breach or failure to perform by Debtor of any obligation, covenant, promise or agreement contained in any other agreement or contract to which Debtor and Secured Party are parties, subject to any applicable cure or grace periods, including the Funding Agreement and the Guaranty Agreement; (iii) any tax levy, attachment, garnishment, levy of execution or other process issued against Debtor or the Collateral; (iv) any Lien or security interest filed or created against the Collateral which is not expressly permitted by Secured Party; (v) the insolvency of Debtor, any bankruptcy or insolvency proceedings, or any assignment for the benefit of creditors commenced by or against Debtor or any accommodation party, surety or guarantor of any of the Liabilities; (vi) the dissolution, merger, consolidation or reorganization of Debtor; or (vii) the assignment by Debtor of any equity in any of the Collateral without the prior written consent of Secured Party.
Source: Item 22 — CONTRACTS (FDD pages 33–34)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, a 'Default' occurs under the following conditions: failure to pay any liabilities to the secured party at maturity, breaching any obligation within the agreement without curing it within fifteen days of written notice, or breaching any obligation within other agreements between the debtor and secured party. Other events constituting default include any tax levy, attachment, garnishment, or execution against the debtor or collateral, and any unauthorized lien or security interest filed against the collateral.
Further events that constitute a default under the All Team agreement include the insolvency of the debtor, any bankruptcy or insolvency proceedings, or any assignment for the benefit of creditors. The dissolution, merger, consolidation, or reorganization of the debtor also constitutes a default. Finally, the assignment by the debtor of any equity in any of the collateral without the prior written consent of the secured party is considered a default.
These conditions are typical in franchise agreements, as franchisors need to protect their brand, system, and financial interests. Prospective All Team franchisees should understand these default conditions thoroughly, as any of these events could trigger significant consequences, including the potential termination of their franchise agreement and loss of their investment. It is important to maintain open communication with All Team and seek legal counsel if facing any financial or operational difficulties that could lead to a default.