What is the purpose of the Collateral Assignment of Lease in the Bang Cookies franchise agreement?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
Lease We do not review the terms of the lease for your Shop Location but require that your landlord acknowledge our rights as set forth in the lease agreement rider attached as Exhibit 4 to the Franchise Agreement (the "Lease Agreement Rider") and that you collaterally assign the lease to us as set forth in the collateral assignment of lease attached as Exhibit 5 to the Franchise Agreement (the "Collateral Assignment of Lease").
We possess the right to disapprove of a proposed lease if the landlord refuses to sign the Lease Agreement Rider in substantially the form set forth in Exhibit 4 to the Franchise Agreement.
The Lease Agreement Rider grants certain rights to us, including our right to be notified in the event of a lease default and, potentially, for us to enter the premises of your Shop.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 24–28)
What This Means (2024 FDD)
According to Bang Cookies's 2024 Franchise Disclosure Document, franchisees are required to collaterally assign their lease to Bang Cookies. This requirement is outlined in Item 8, which discusses restrictions on sources of products and services. Bang Cookies does not review the terms of the lease for the shop location but mandates that the landlord acknowledges Bang Cookies's rights as detailed in the Lease Agreement Rider, which is Exhibit 4 to the Franchise Agreement. The Collateral Assignment of Lease itself is attached as Exhibit 5 to the Franchise Agreement.
This Collateral Assignment of Lease serves as a security measure for Bang Cookies. By having the lease collaterally assigned, Bang Cookies gains certain rights related to the leased property. The Lease Agreement Rider grants Bang Cookies the right to be notified if the franchisee defaults on the lease and potentially allows Bang Cookies to enter the premises of the shop.
For a prospective Bang Cookies franchisee, this means that they must ensure their landlord is willing to sign the Lease Agreement Rider. Failure to do so could result in Bang Cookies disapproving the proposed lease. The franchisee should carefully review Exhibits 4 and 5 of the Franchise Agreement to fully understand the rights and obligations associated with the Lease Agreement Rider and the Collateral Assignment of Lease. This arrangement is not uncommon in franchising, as it provides the franchisor with a degree of control and protection over the location of the franchise, which is critical to the brand's success.