Does Azal Coffee require the security interest to be a first priority security interest?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
4.16 Security Interest.
You grant to us a continuing security interest in all of your assets and the assets of the Franchise Business, including but not limited to: all personal and fixture property of every kind and nature including without limitation all goods (including inventory, furniture, fixtures, equipment and any accessions thereto), instruments (including promissory notes), documents, accounts (including health-care-insurance receivables), chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, securities and all other investment property, supporting obligations, any other contract rights or rights to payment of money, insurance claims and proceeds, tort claims, and all general intangibles (including all payment intangibles) now or hereafter owned by you, and all proceeds and products arising from the sale, exchange or other disposition of any or all of the aforesaid types of properties, whether cash or non-cash in nature (all such property referred to as the "Collateral").
This security interest is granted to secure payment of all indebtedness you or any of your affiliates owe us or any of our affiliates, whether now existing or arising in the future, absolute or contingent, due or to become due, including, but not limited to all costs, expenses, and attorneys' fees incurred in the collection of any indebtedness owed to us or our affiliates ("Indebtedness"). This security interest must be a first priority security interest in the Collateral unless you request and we agree in writing to subordinate the security interest to a purchase money security interest you desire to grant to a lender in connection with the initial development of the Franchise Business.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, Azal Coffee is granted a continuing security interest in all of the franchisee's assets and the assets of the franchise business. This includes all personal and fixture property, goods, instruments, documents, accounts, chattel paper, deposit accounts, letter-of-credit rights, commercial tort claims, securities, investment property, supporting obligations, contract rights, insurance claims and proceeds, tort claims, and general intangibles. This also extends to all proceeds and products from the sale, exchange, or disposition of these properties.
This security interest serves to secure the payment of all indebtedness that the franchisee or their affiliates owe to Azal Coffee or its affiliates. This covers existing and future debts, whether absolute or contingent, due or not yet due. It also includes all costs, expenses, and attorneys' fees incurred in the collection of any indebtedness.
The security interest granted to Azal Coffee must be a first priority security interest in the collateral. However, there is an exception: Azal Coffee may agree in writing to subordinate its security interest to a purchase money security interest. This would occur if the franchisee desires to grant such an interest to a lender in connection with the initial development of the Azal Coffee franchise business, but this requires a written agreement from Azal Coffee.