What must an Azal Coffee franchisee do to request subordination of the security interest?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
- (k) If the transfer involves installment payments by the transferee to the Seller, the Seller must sign a subordination agreement under which the Seller subordinates its right to receive any installment from the transferee to our right to receive all amounts due to us through the due date of the installment. The subordination agreement must be in a format and contain terms and conditions specified by us.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, if a transfer of the franchise involves installment payments from the transferee to the seller, the seller must sign a subordination agreement. This agreement ensures that the seller's right to receive installment payments is secondary to Azal Coffee's right to receive any amounts due up to the installment's due date.
The subordination agreement must adhere to the format and include the terms and conditions specified by Azal Coffee. This requirement protects Azal Coffee's financial interests by prioritizing their claims over the seller's during a transfer involving installment payments.
This condition is in place to protect the Franchise Marks and Franchise Systems, and Azal Coffee asserts that it does not impose unreasonable restrictions on a transfer. Prospective franchisees should carefully review the specific terms of the subordination agreement to understand their obligations fully during a transfer scenario.