What requirements must an Alloy franchisee satisfy when granting a security interest in their assets?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
es of this subparagraph 11.A, a pledge or seizure of any ownership interests in you or in any Owner that affects the ownership of 20% or more of you or any Owner, which we have not approved in advance in writing; or
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- Any grant of a security interest in, or otherwise encumbrance of, any of the assets or securities of you, including the Facility unless you satisfy our requirements. Such requirements may include execution of an agreement by the secured party in which it acknowledges the creditor's obligations, and agrees that in the event of any default by you under any documents related to the security interest, we shall have the right and option (but not the obligation) to be substituted as obligor to the secured party and to cure your default; and, in the event we exercise such option, any acceleration of indebtedness due to your default shall be void.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, a franchisee must satisfy certain requirements before granting a security interest in their assets or securities, including the Alloy facility itself. Alloy requires prior written consent for any security interest and it must be under conditions acceptable to them.
These conditions may involve the secured party (the lender) agreeing to certain obligations. Specifically, the secured party may need to acknowledge the franchisee's obligations to Alloy and agree that if the franchisee defaults on their loan, Alloy has the option, but not the obligation, to step in as the obligor, essentially taking over the loan and curing the franchisee's default. If Alloy exercises this option, any accelerated debt due to the franchisee's default becomes void.
This provision protects Alloy by giving them the ability to maintain control over the franchise and prevent a lender from taking over the business in case of franchisee financial difficulties. It also ensures that Alloy can continue operating the franchise location under the Alloy brand, even if the original franchisee is unable to continue. A prospective franchisee should carefully consider these requirements and discuss them with their lender to ensure they can comply with Alloy's conditions.