If Collateral is sold on credit, when are the obligations reduced for a Bath Tune Up franchise?

According to Bath Tune Up's 2025 Franchise Disclosure Document, if the Secured Party (likely the franchisor or a lending institution) sells or leases any of the Collateral (assets used as security for a loan) on credit terms or for future delivery, the obligations of the Pledgor (likely the franchisee) are not reduced until the Secured Party finally collects payment. This means that even though the collateral has been sold, the franchisee's debt remains until the franchisor receives the full payment from the sale.

This clause protects the franchisor by ensuring they are not penalized for selling collateral on credit if the buyer defaults. It places the risk of non-payment on the franchisee, who remains responsible for the debt until the franchisor actually receives the funds.

For a prospective Bath Tune Up franchisee, this highlights the importance of understanding the terms of any financing agreements and the potential consequences of defaulting on obligations. It is crucial to have a clear understanding of what assets are considered collateral and how their sale impacts outstanding debt, especially if the sale is on credit. Franchisees should seek legal and financial advice to fully grasp these implications.