What is the effect of the termination of the Franchise Agreement on the Collateral Assignment of Lease for Aw?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
16.5 Assignment of Lease. Upon termination or expiration of this Agreement, at our option you shall immediately assign to us your interest in any lease then in effect for the premises of your Papa Ray's Pizza Restaurant, as you agreed to in the Exhibit 3 Collateral Assignment of Lease.
16.6 De-Identification of Premises. Upon termination or expiration of this Agreement, you agree, in the event you continue to operate or subsequently begin to operate any other business (subject to any restrictions against doing so provided in this Agreement), not to use any reproduction, counterfeit, copy or colorable imitation of the Marks either in connection with such other business or the promotion thereof, which is likely to cause confusion, mistake or deception, or which is likely to dilute our exclusive rights in and to the Marks and further agree not to utilize any designation of origin or description or representation which falsely suggests or represents an association or connection with us so as to constitute unfair competition.
If we do not opt to take assignment of the lease for the Premises upon the expiration or termination of this Agreement, you shall immediately make such
modifications or alterations to the Premises as may be necessary to prevent any association between us or the System and any business thereon subsequently operated by you or others, and shall make such specific additional changes thereto as we may reasonably request for that purpose, including, without limitation, removal of all distinctive physical and structural features identifying the System. In the event you fail or refuse to comply with the requirements of this Paragraph, we shall have the right to enter upon the premises, without being guilty of trespass or any other tort, for the purpose of making or causing to be made such changes as may be required at your expense, which expense you agree to pay upon demand.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, upon the termination or expiration of the Franchise Agreement, Aw has the option to require the franchisee to assign their interest in the lease for the Papa Ray's Pizza Restaurant premises to Aw. This is part of the agreement outlined in Exhibit 3, the Collateral Assignment of Lease. If Aw chooses not to take assignment of the lease, the franchisee must modify the premises to remove any association with Aw's system and brand, including removing distinctive physical and structural features. Aw also retains the right to enter the premises to make these changes at the franchisee's expense if the franchisee fails to do so.
This clause ensures that Aw can maintain control over the location and prevent any potential confusion or association with the brand after the franchise agreement ends. It protects Aw's brand identity and prevents former franchisees from operating competing businesses in a way that could mislead customers. The franchisee is responsible for the costs associated with de-identifying the premises if Aw does not take over the lease.
For a prospective Aw franchisee, this means that the lease agreement for the restaurant location is not entirely within their control. Aw has the right to step in and take over the lease if the franchise agreement is terminated. Additionally, if Aw doesn't want the lease, the franchisee is obligated to invest further to remove all branding and distinctive features of the Aw restaurant at that location. This could involve significant expenses and potential disruptions to any subsequent business the franchisee might operate at the same location. Franchisees should carefully consider these potential costs and restrictions when entering into a franchise agreement with Aw.