What is the definition of 'Collateral' in the context of the Big Apple Bagels Security Agreement?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
| | This Security Agreement dated is by and between | | |------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--| | | BAB Systems, Inc., an Illinois corporation, of 500 Lake Cook Road, Suite 475, Deerfield, Illinois | | | 60015 | ("Secured Party") and | | | | , whose principal place of business is ("Debtor"). RECITALS | | | A. | Debtor is a franchisee under a Franchise Agreement dated ("Franchise Agreement") with Secured Party as Franchisor, pursuant to which Franchise Agreement Debtor has ongoing monetary and non-monetary obligations to Secured Party. | | | B. | Debtor has locations at which Debtor operates businesses known as "Big Apple Bagels" ("BAGELS Stores"), pursuant to the Franchise Agreement; the addresses of the locations are listed on Schedule "A" attached hereto and incorporated herein by reference. | | | C. | Debtor is giving Secured Party a security interest in the collateral described in this | | | Agreement. | NOW THEREFORE, in consideration of the several and mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: | | | 1. | The Recitals set forth above shall be incorporated into this part of the Agreement as though they were fully set forth herein. | | | 2. | Description of Collateral: the following property located at or relating to the BAGELS Stores noted on Schedule A: all equipment, furniture, fixtures, inventory, personal property, supplies, general intangibles, accounts receivable, accounts, contract rights, chattel paper and instruments, now owned or hereafter acquired by the Debtor, and all additions and accessions to, and all proceeds and products of the foregoing ("Collateral"). | | | 3. | Debtor hereby grants to Secured Party a security interest in the Collateral described in | | paragraph 2 above, to secure all debts, obligations and liabilities of Debtor to Secured Party arising
out of the Franchise Agreement described in Paragraph A of the Recitals.
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- The Collateral will be located at the addresses noted on Schedule A hereto. Debtor will not, without Secured Party's consent, remove the Collateral from the locations noted on Schedule A
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- Debtor will not, without Secured Party's consent: (i) allow the Collateral to become an accession to other goods;
Source: Item 22 — CONTRACTS (FDD pages 86–87)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, the security agreement defines 'collateral' as the property located at or relating to the BAGELS Stores. This includes all equipment, furniture, fixtures, inventory, personal property, supplies, general intangibles, accounts receivable, accounts, contract rights, chattel paper, and instruments, whether currently owned or acquired in the future by the franchisee (Debtor). It also encompasses all additions, accessions, proceeds, and products derived from these items.
This collateral serves as security for all debts, obligations, and liabilities the franchisee owes to Big Apple Bagels (Secured Party) under the Franchise Agreement. The franchisee grants Big Apple Bagels a security interest in this collateral to ensure fulfillment of their obligations. The collateral's location is restricted to the addresses listed on Schedule A of the agreement, and the franchisee needs the franchisor's consent to move it from those locations.
The franchisee is also restricted from allowing the collateral to become an accession to other goods, or from selling, leasing, transferring, manufacturing, processing, assembling, or furnishing the collateral under service contracts, except for inventory sold in the ordinary course of business. Additionally, the franchisee cannot affix the collateral to real estate, except for items identified as fixtures. This comprehensive definition and the associated restrictions provide Big Apple Bagels with a strong security interest in the franchisee's assets, protecting their financial interests in the event of a default under the Franchise Agreement.
Prospective franchisees should carefully review Schedule A and understand the full scope of the assets included as collateral, as well as the implications of these restrictions on their business operations. It is important to seek legal counsel to fully understand the terms of the security agreement and how it may impact their rights and obligations.