If Aw cures a default under the lease, can they assign the lease to themselves?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
At our option, we may require that the lease: (i) have a term, with initial and renewal terms, at least equal to the initial term of this Agreement; (ii) be collaterally assigned to us (with the consent of the lessor, if required), by execution of the Collateral Assignment of Lease attached hereto as Exhibit 3 (the assignment may be exercised only upon your default under the lease or this Agreement or the expiration or termination of this Agreement); (iii) provides that the lessor shall give written notice to us (concurrently with you) of any default by you under the lease, and will give us an additional fifteen (15) days to cure any default not cured by you during the cure period and assign the lease to us if defaults are cured by us; (iv) permits the use on the Premises of all signs required by the us for Papa Ray's Pizza Restaurants, subject to applicable local laws, codes and ordinances; (v) provides that on expiration or termination of your Franchise Agreement, we may enter the leased
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, Aw has the option to require that the lease for a Papa Ray's Pizza Restaurant includes a provision that if the franchisee defaults on the lease, the lessor must provide written notice to Aw. This notice would be concurrent with the notice given to the franchisee. Aw would then have an additional fifteen days beyond the franchisee's cure period to cure the default themselves. If Aw cures the default, they have the right to assign the lease to themselves.
This clause protects Aw's interest in maintaining the location for a Papa Ray's Pizza Restaurant. By having the right to cure a default and take over the lease, Aw can prevent the loss of a valuable location due to a franchisee's financial difficulties or failure to meet lease obligations. This is a fairly common practice in franchising, as it allows the franchisor to maintain control over key aspects of the business, such as location.
For a prospective Aw franchisee, this means that the lease agreement for their Papa Ray's Pizza Restaurant may include a collateral assignment to Aw. This assignment would only be exercised if the franchisee defaults under the lease or the Franchise Agreement, or upon the expiration or termination of the Franchise Agreement. It is important for the franchisee to understand the terms of the lease and the conditions under which Aw can exercise its right to cure a default and take over the lease. The franchisee should carefully review the Collateral Assignment of Lease (Exhibit 3) attached to the Franchise Agreement to fully understand their obligations and Aw's rights.