May Aw require that the lease be collaterally assigned to them by a collateral assignment agreement for a Papa Ray's Pizza Restaurant?

According to Aw's 2025 Franchise Disclosure Document, Aw requires franchisees to submit their proposed lease for site approval before signing. Aw retains the right to demand that the lease be collaterally assigned to them through a collateral assignment agreement. This agreement must be in a form and substance reasonably acceptable to Aw. This collateral assignment serves to secure the franchisee's performance of their liabilities and obligations to Aw under the franchise agreement.

This requirement means that a prospective Papa Ray's Pizza franchisee might need to negotiate lease terms that accommodate Aw's potential need for collateral assignment. The franchisee should carefully review the franchise agreement to understand the specific terms and conditions that Aw may require in the lease. This could impact the franchisee's relationship with their landlord and their ability to make independent decisions about the lease.

The FDD also states that the lease must contain certain terms and conditions as described in the franchise agreement. Therefore, it is crucial for potential franchisees to understand these terms before signing any lease. This ensures that the lease aligns with Aw's requirements and protects the franchisee's interests. Franchisees should seek legal counsel to review both the franchise agreement and the lease to fully understand their obligations and rights.

Overall, the collateral assignment requirement is a mechanism for Aw to protect its interests and ensure franchisee compliance. While this is not uncommon in franchising, prospective franchisees should carefully consider the implications and ensure they are comfortable with the terms before proceeding with the franchise.