If an Alloy franchisee defaults on a payment, is Alloy authorized to make the payment on their behalf?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
Assumption and Subsequent Assignment By Franchisor.
If Franchisor elects to assume the Lease under paragraph 2, or unilaterally assumes the Lease as provided for in paragraphs 3 or 4, Landlord and Tenant agree that:
- (a) Tenant will remain liable for the responsibilities and obligations, including amounts owed to Landlord, prior to the date of assignment and assumption.
Further, Tenant shall be and remain liable to Landlord for all of its obligations under the Lease, notwithstanding any assignment or assumption of the Lease by Franchisor.
Franchisor shall be entitled to recover from Tenant all amounts it pays to Landlord to cure Tenant's defaults under the Lease, including interest and reasonable collection costs.
- (b) Franchisor, upon taking possession of the Premises, shall cure any default specified by Landlord within the timeframes noted herein and shall execute and deliver to Landlord its assumption of Tenant's rights and obligations under the Lease.
Franchisor shall pay, perform and be bound by all the duties and obligations of the Lease applicable to Tenant.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, Alloy, as the franchisor, has certain rights and responsibilities when a franchisee defaults on lease obligations. Specifically, if an Alloy franchisee, as the tenant, fails to meet their obligations under the lease agreement, Alloy has the option to step in and assume the lease.
According to the FDD, if Alloy elects to assume the lease, they are obligated to cure any defaults specified by the landlord within the given timeframes and must formally assume the tenant's rights and obligations under the lease. Furthermore, Alloy is entitled to recover from the tenant all amounts it pays to the landlord to correct the tenant's defaults, including interest and reasonable collection costs. This means that while Alloy can make payments to cure a franchisee's default, the franchisee is ultimately responsible for reimbursing Alloy for those payments.
Additionally, the FDD states that even if Alloy assumes the lease, the original franchisee remains liable to the landlord for all obligations under the lease, notwithstanding Alloy's assumption of the lease. This provision underscores that the franchisee's initial responsibility is not absolved by Alloy's intervention. Alloy's role is more of a safety net to ensure the lease obligations are met to protect the brand and maintain relationships with landlords, with the expectation that the franchisee will ultimately bear the financial burden of any defaults. This arrangement protects Alloy's interests while holding franchisees accountable for their lease commitments.