What right does Beggars Pizza Franchisor have if a franchisee defaults on a security interest?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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 obligor to the secured party and cure any default of Franchisee.
If Franchisor exercises such option, any acceleration of indebtedness due to Franchisee's default will be void.
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to the 2025 Beggars Pizza Franchise Disclosure Document, a franchisee cannot grant a security interest in the restaurant or its assets unless the secured party agrees that if the franchisee defaults, Beggars Pizza has the option to step in as the obligor and cure the default.
This means that if a franchisee takes out a loan and uses the Beggars Pizza restaurant as collateral, the lender must agree that Beggars Pizza has the right to take over the franchisee's obligations if the franchisee fails to meet their loan obligations. Beggars Pizza is not obligated to take over the loan, but has the option to do so.
If Beggars Pizza exercises this option, any acceleration of the debt due to the franchisee's default becomes void. This protects Beggars Pizza from having to immediately pay the full loan amount and allows them to maintain control over the franchise location and operations, ensuring brand consistency and minimizing disruption.