What requirements must be met when granting a security interest in the assets of an Alloy franchise?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
of first refusal provided for in subparagraph 11.F must be made by submission of our form of application for consent to transfer, which must be accompanied by the documents we request and other required information. The application must indicate whether you or an Owner proposes to retain a security interest in the property to be transferred. No security interest may be retained or created, however, without our prior written consent and except upon conditions acceptable to us. Any agreement used in connection with a transfer will be subject to our prior written approval, which approval will not be withheld unreasonably. You immediately must notify us of any proposed transfer and must submit promptly to us the application for consent to transfer and any other required documents and information. 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
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to the 2025 Alloy FDD, if a franchisee intends to retain a security interest in transferred property, they must first seek written consent from Alloy. This consent is granted at Alloy's discretion and is subject to conditions they deem acceptable.
Furthermore, any agreement related to the transfer is also subject to Alloy's prior written approval, which, according to the FDD, will not be unreasonably withheld. The franchisee is obligated to promptly inform Alloy of any proposed transfer and submit the necessary application for consent, along with any other required documentation.
Attempting to transfer without Alloy's prior written consent, or failing to comply with the terms of the agreement, renders the transfer void. In such cases, the franchisee's interest in the agreement is considered voluntarily abandoned. This gives Alloy the right to either declare the franchisee in default and terminate the agreement or to collect a transfer fee equal to two times the standard transfer fee, which is normally $10,000, effectively making the penalty $20,000.
These stipulations ensure that Alloy maintains control over who operates under their brand and that any transfer of ownership meets their standards and financial requirements. It is common practice in franchising to have such controls to protect the brand and ensure consistency across all franchise locations.