Does Americas Best Value Inn require a security interest under either of the Notes?

According to the 2025 Americas Best Value Inn Franchise Disclosure Document, Americas Best Value Inn does not require a security interest under either the Initial Fee Note or the Incentive Note. However, Americas Best Value Inn requires each person with a 20% or greater direct or indirect ownership interest in the franchisee entity to sign a Guaranty attached to the Franchise Agreement. This Guaranty means that these individuals personally guarantee the franchisee's obligations under the Notes.

This arrangement means that while Americas Best Value Inn does not take a direct security interest in the franchisee's assets, they do require a personal guarantee from significant owners. This is a common practice in franchising, as it provides the franchisor with additional recourse in case of default. The personal guarantee makes the individuals liable for the debts of the franchise, which can include the repayment of the Initial Fee Note or the Incentive Note.

Prospective Americas Best Value Inn franchisees should carefully consider the implications of signing a personal guarantee. They should understand that they are personally liable for the franchise's debt, and their personal assets could be at risk if the franchise defaults on its obligations. It is advisable to seek legal and financial advice before signing the Franchise Agreement and the associated Guaranty to fully understand the risks and obligations involved.