What happens if an Alloy franchisee retains a security interest without Alloy's consent?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
No security interest may be retained or created, however, without our prior written consent and except upon conditions acceptable to us.
Any attempted transfer by you without our prior written consent or otherwise not in compliance with the terms of this Agreement will be void, your interest in this Agreement will be voluntarily abandoned, and it will provide us with the right to elect either to deem you in default and terminate this Agreement or to collect from you and the guarantors a transfer fee equal to two times the transfer fee provided for in subparagraph 11.C.
- C.
Transfer Fee.
You must pay to us a transfer fee in the amount of $10,000.
The transfer fee is nonrefundable even if, for any reason, the proposed transfer does not occur.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, franchisees must obtain prior written consent from Alloy before retaining or creating any security interest in transferred property. The application for transfer must indicate whether the franchisee or an owner proposes to retain a security interest in the property to be transferred. Alloy's consent is contingent upon conditions acceptable to them.
If a franchisee attempts to transfer their interest without Alloy's prior written consent or fails to comply with the terms of the franchise agreement, the attempted transfer will be considered void. In such cases, the franchisee's interest in the agreement will be treated as voluntarily abandoned.
Furthermore, Alloy has the right to either deem the franchisee in default and terminate the agreement or collect a transfer fee equal to two times the standard transfer fee. The standard transfer fee is $10,000, so the penalty fee for unauthorized transfer would be $20,000. This fee is nonrefundable, regardless of whether the proposed transfer occurs.