If Alloy makes a payment on behalf of a defaulting Alloy franchisee, what is the franchisee's obligation?

According to Alloy's 2025 Franchise Disclosure Document, if Alloy assumes a lease due to a franchisee's default, the franchisee remains liable to the landlord for all obligations under the lease, even after the lease is assigned or assumed by Alloy. Alloy is entitled to recover from the franchisee all amounts it pays to the landlord to cure the franchisee's defaults, including interest and reasonable collection costs. This means that if a franchisee fails to meet their lease obligations and Alloy steps in to cover those costs, the franchisee is then indebted to Alloy for the amount paid, plus any applicable interest and collection expenses.

This provision protects Alloy by ensuring they can recoup any financial losses incurred by assisting a defaulting franchisee with their lease obligations. It also incentivizes franchisees to maintain their lease agreements to avoid additional financial burdens. The franchisee's liability extends to all obligations under the lease, meaning they are responsible for all amounts owed to the landlord prior to the date of assignment and assumption of the lease by Alloy.

For a prospective Alloy franchisee, this highlights the importance of carefully managing their lease obligations. Failure to do so could result in Alloy stepping in to cover defaults, which would then create a debt owed by the franchisee to Alloy. This debt includes not only the original amount of the default but also any interest and collection costs incurred by Alloy. Franchisees should ensure they have sufficient financial resources to meet their lease obligations to avoid this scenario.