Is a Browns Chicken franchisee required to execute a Collateral Assignment of Lease?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall not execute a lease which has for any reason been disapproved by Brown. Franchisee shall deliver a copy of the signed lease for the Premises to Brown within fifteen (15) days of its execution. Franchisee shall execute a Collateral Assignment of Lease, attached hereto as Rider B, by which Franchisee assigns to Brown all of his right, title and interest as tenant under the lease for the 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. Brown's approval of Franchisee's lease is conditioned on receipt of the signed Collateral Assignment.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to the 2025 Browns Chicken Franchise Disclosure Document, a franchisee is required to execute a Collateral Assignment of Lease. The franchisee assigns all rights, title, and interest as a tenant under the lease for the store premises to Browns Chicken. This assignment is for collateral purposes and can be exercised only if the franchisee defaults under the lease or the Franchise Agreement. Browns Chicken's approval of the franchisee's lease is conditional on receiving the signed Collateral Assignment.
This requirement means that Browns Chicken has a security interest in the lease. If the franchisee fails to meet their obligations under the lease or the franchise agreement, Browns Chicken can step in and take over the lease to protect their interests and ensure the continued operation of the Browns Chicken franchise at that location. This protects Browns Chicken from potential disruptions caused by a franchisee's default.
The Collateral Assignment of Lease protects Browns Chicken by giving them control over the store location if the franchisee defaults. This is a common practice in franchising, as it allows the franchisor to maintain brand consistency and operational standards. The franchisee must understand that failing to comply with the lease or franchise agreement could result in Browns Chicken taking over the lease.
Prospective Browns Chicken franchisees should carefully review the terms of the Collateral Assignment of Lease and understand their obligations under both the lease and the Franchise Agreement. It is advisable to seek legal counsel to fully understand the implications of this assignment and to ensure they can meet all requirements.