Is a Beggars Pizza franchisee allowed to grant a security interest in the Restaurant?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
as Franchisor may reasonably require; and
- 14.3.9 That Franchisee pays to Franchisor a transfer fee of Seven Thousand Five Hundred Dollars ($7,500). However, in the case of a transfer to a corporation formed by Franchisee for the convenience of ownership, no such transfer fee will be required.
- 14.4 No Security Interest. Franchisee will not grant a security interest in the Restaurant or in any of the assets of the Restaurant unless the secured party agrees that if any default by Franchisee under any documents related to the security interest occurs, Franchisor will have the right and option, but not the obligation, to be substituted as
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to Beggars Pizza's 2025 Franchise Disclosure Document, a franchisee is generally prohibited from granting a security interest in the Restaurant or its assets. However, this prohibition does not apply if the secured party agrees in writing (in a form acceptable to Beggars Pizza) that in the event of default, the secured party will provide Beggars Pizza with notice and an opportunity to take over the franchisee's rights and assume the franchisee's obligations under the franchise agreement. Beggars Pizza also has to be able to operate the Restaurant itself, or transfer the franchise rights and obligations to a third party who meets Beggars Pizza's then-current requirements for franchisees.
This provision protects Beggars Pizza by ensuring that the brand maintains control over the franchise and its operation, even if the franchisee defaults on a secured loan. It allows Beggars Pizza to maintain its standards and protect its brand reputation by either taking over the restaurant's operation itself or transferring it to a qualified new franchisee.
For a prospective Beggars Pizza franchisee, this means that while they can obtain financing for their business, they must ensure that any security agreement includes provisions that protect Beggars Pizza's interests. This may require additional negotiation with lenders to ensure the terms are acceptable to both the franchisee and Beggars Pizza. Franchisees should carefully review this section with their legal and financial advisors to fully understand the implications before signing any financing agreements.