What is the definition of 'security interest' in the context of a Bens Soft Pretzels franchise agreement?
Bens_Soft_Pretzels Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Guarantee. In the case of an installment sale for which we have consented to you or any Owner retaining a security interest or other financial interest in this Agreement or the business operated thereunder, you or such Owner, and the guarantors, are obligated to guarantee the performance under this Agreement until the final close of the installment sale or the termination of such interest, as the case may be.
Source: Item 22 — CONTRACTS (FDD pages 46–47)
What This Means (2025 FDD)
Based on the 2025 Bens Soft Pretzels Franchise Disclosure Document, the term 'security interest' is referenced within the context of transferring a franchise. Specifically, it relates to situations where the seller of the franchise (the franchisee) finances the sale for the buyer (the assignee) through an installment plan.
In such cases, the original franchisee or owner might retain a 'security interest' or other financial interest in the franchise agreement or the business being operated. This means the seller has a legal claim on the franchise as collateral until the buyer completes all payments. Bens Soft Pretzels requires that if the original franchisee or owner retains such a security interest, they must continue to guarantee the performance of the franchise agreement until the installment sale is finalized or the security interest is terminated.
This condition protects Bens Soft Pretzels by ensuring that someone remains responsible for the franchise's performance even after the transfer, particularly when the original franchisee is providing financing. It also ensures that the brand standards and operational requirements are upheld during the transition period. For a prospective franchisee, this means that if they plan to finance the sale of their franchise, they will still be held responsible for the franchise's performance until the final payment is made and the security interest is removed.