Under what conditions can Big Apple Bagels exercise the Collateral Assignment of Lease?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
h has for any reason been disapproved by Franchisor. Franchisee shall deliver a copy of the signed lease to Franchisor within fifteen (15) days of execution thereof.
iv. Franchisee shall execute a Collateral Assignment of Lease, attached hereto as Rider B, by which Franchisee assigns to Franchisor all of his right, title and interest as tenant under the lease for the BAGELS Store premises. The assignment is for collateral purposes and may be exercised only upon a default by Franchisee under his lease or under this Agreement. Franchisor's approval of Franchisee's lease is conditioned on receipt of the signed Collateral Assignment.
v. Franchisee's execution of a lease for a site for the BAGELS Store shall constitute acceptance by Franchisee of such site and location and of the terms of such lease, sublease or purchase.
vi. Franchisor's approval of the lease or sublease does not constitute a warranty or representation of any kind, express or implied, as to its fairness, suitability or profitability or as to Franchisee's ability to comply with its terms.
b.
Source: Item 22 — CONTRACTS (FDD pages 86–87)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, the franchisor can exercise the Collateral Assignment of Lease under specific default conditions. The franchisee is required to execute a Collateral Assignment of Lease, which assigns all rights, title, and interest as a tenant to Big Apple Bagels. This assignment serves as collateral and can be exercised if the franchisee defaults under the lease or the Franchise Agreement.
Specifically, Big Apple Bagels has the right to take possession of the premises and expel the franchisee if the franchisee defaults under the lease for the BAGELS Store, defaults under the Franchise Agreement, or defaults under any document securing the Franchise Agreement. In such cases, the franchisee loses all rights, title, and interest in the lease.
This provision protects Big Apple Bagels' interest in maintaining control over the store location and ensuring continuous operation under the brand. It is a fairly standard practice in franchising to have such a clause to safeguard the brand and business continuity in case a franchisee fails to meet their obligations. The franchisee should understand that any failure to comply with the lease or franchise agreement can result in the loss of their business location.