Under what conditions can Aw exercise the Collateral Assignment of Lease?
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 may require franchisees to collaterally assign their lease for the premises to Aw. This gives Aw the option to exercise the assignment under specific conditions.
Aw can exercise the Collateral Assignment of Lease if the franchisee defaults under the lease agreement, defaults under the Franchise Agreement, or upon the expiration or termination of the Franchise Agreement. This means that if the franchisee fails to meet their obligations under either the lease or the franchise agreement, Aw has the right to take over the lease for the restaurant location.
This provision protects Aw by ensuring they can maintain control of the restaurant location even if the franchisee is not performing well or leaves the system. For a prospective franchisee, this means that their lease is not entirely under their control and can be taken over by Aw under certain circumstances. It is important for franchisees to understand these conditions and ensure they comply with both the lease and franchise agreements to avoid losing their location.
The lease must have a term, including initial and renewal terms, at least equal to the initial term of the Franchise Agreement. The lessor must also give written notice to Aw of any default by the franchisee under the lease, providing Aw with 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.