Can a Bombs Away franchisee grant a security interest in the Franchise Agreement to any person or entity?

According to the 2024 Bombs Away Franchise Disclosure Document, a franchisee is explicitly prohibited from granting a security interest in the Franchise Agreement to any person or entity. This restriction is in place to protect Bombs Away's interests and control over the franchise system.

This means that a Bombs Away franchisee cannot use the Franchise Agreement itself as collateral for any loan or financial obligation. However, if a franchisee grants an "all assets" security interest to a lender, they must ensure that the Franchise Agreement is expressly exempted from that security interest. This ensures that the agreement remains free from any claims by the lender.

This provision is fairly common in franchising, as franchisors want to maintain control over who operates a franchise and prevent unwanted third parties from gaining rights to the franchise through a security interest. Prospective Bombs Away franchisees should be aware of this restriction and plan their financing accordingly, ensuring that they do not violate this clause when seeking funding for their business.