Can Aw require the lease to be collaterally assigned to them?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
Agreement.
- 4.2 Lease of Premises. Any lease or sublease of the Premises must be approved by us before it is executed by you and we can require that certain terms and provisions be included in the lease or sublease. 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
premises and remove all signs, sign-faces and other items identifying Marks; (vi) provides that the Premises will only be used for the operation of a Papa Ray's Pizza Restaurant; and (vii) provides that the lessor will not lease other premises in the same shopping center to a competing business.
- 4.3 Construction Specifications. We will furnish specifications reflecting our requirements for interior and exterior design, decoration, fixtures, furniture, layout, equipment, and signs for Papa Ray's Pizza Restaurants. It will then be your responsibility to comply with all ordinances, building codes, permit requirements, and lease requirements and restrictions applicable to the Premises. You must advise us of any variation from the specifications that are necessary to meet local requirements. You must submit final construction plans and specifications to us for our approval before you begin construction at the Premises, and must construct the Papa Ray's Pizza Restaurant in accordance with those approved plans.
- 4.4 Development of the Papa Ray's Pizza Restaurant.
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 the premises of a Papa Ray's Pizza Restaurant be collaterally assigned to them. This means that as a franchisee, you may be required to assign your lease to Aw, giving them certain rights to the lease. This requirement is subject to the lessor's consent, if required. The collateral assignment of lease is included as Exhibit 3 to the Franchise Agreement.
Aw can exercise this assignment only if the franchisee defaults under the lease or the Franchise Agreement, or upon the expiration or termination of the Franchise Agreement. This provides Aw with a safety net, allowing them to take over the lease if the franchisee fails to meet their obligations or when the franchise relationship ends. The lease must have a term, including initial and renewal terms, that is at least equal to the initial term of the Franchise Agreement.
The lease terms that Aw may require include that the lessor gives written notice to Aw concurrently with the franchisee of any default by the franchisee under the lease. The lessor must also give Aw an additional fifteen days to cure any default not cured by the franchisee during the cure period and assign the lease to Aw if defaults are cured by Aw. The lease must permit the use on the premises of all signs required by Aw for Papa Ray's Pizza Restaurants, subject to applicable local laws, codes and ordinances. The lease must also state that the premises will only be used for the operation of a Papa Ray's Pizza Restaurant and that the lessor will not lease other premises in the same shopping center to a competing business.
Upon termination or expiration of the Franchise Agreement, Aw has the option to have the franchisee immediately assign to them their interest in any lease then in effect for the premises. If Aw does not opt to take assignment of the lease for the Premises upon the expiration or termination of this Agreement, the franchisee must immediately make modifications or alterations to the Premises as may be necessary to prevent any association between Aw or the System and any business thereon subsequently operated by the franchisee or others, and shall make such specific additional changes thereto as Aw may reasonably request for that purpose, including, without limitation, removal of all distinctive physical and structural features identifying the System.