Under the Commercial Code, where are the Secured Party's rights defined for a Browns Chicken franchise?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
As security for payment of all sums due from Franchisee to Brown hereunder and for performance of any and all obligations of Franchisee as set forth in this Franchise Agreement, Franchisee shall and hereby does grant to Brown a continuing security interest in certain property of Franchisee as more particularly described on Rider D to this Franchise Agreement, and Franchisee shall execute a Security Agreement and Financing Statement in substantially the form set forth in Rider D hereto. Franchisee consents to Brown filing a Uniform Commercial Code Financing Statement in the form attached at Rider F hereto against the Collateral described on Rider E. Franchisee shall permit no financing statement or lien to be filed or recorded against the property identified in Rider D hereto other than Brown's lien as described herein. However, Brown will not unreasonably withhold its consent to the filing of a lien against the Collateral by a lender from whom Franchisee obtains financing in connection with the establishment of the franchised business. Brown will in such cases agree to subordinate its lien to that of the lender. Upon Franchisee's failure to perform any term or pay any sum due under this Franchise Agreement, Brown shall have the right, without notice to Franchisee, to take immediate possession of the property identified on Rider D hereto, which Rider D is incorporated herein by this reference.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to the 2025 Browns Chicken Franchise Disclosure Document, the rights of the Secured Party (Browns Chicken, LLC) are defined within the Security Agreement. Specifically, Item 22 outlines that as security for payments and obligations, the franchisee grants Browns Chicken a security interest in certain property, detailed in Rider D of the Franchise Agreement. The franchisee must also execute a Security Agreement and Financing Statement, with a form provided in Rider D. Browns Chicken is also given the right to file a Uniform Commercial Code Financing Statement against the collateral described in Rider E, with the franchisee's consent.
Browns Chicken retains the right to take immediate possession of the property outlined in Rider D without notice to the franchisee if the franchisee fails to meet the terms or payments outlined in the Franchise Agreement. This essentially means that Browns Chicken has a legal claim on specific assets of the franchise to ensure financial obligations are met. The FDD also states that the franchisee cannot allow any other financing statement or lien to be filed against the property in Rider D, except for Browns Chicken's lien.
However, Browns Chicken will not unreasonably withhold consent for the franchisee to file a lien against the collateral if the franchisee is obtaining financing to establish the franchised business. In such cases, Browns Chicken will agree to subordinate its lien to the lender's lien. This indicates a willingness to work with franchisees to secure necessary financing, while still protecting their own interests. Prospective franchisees should carefully review Rider D and Rider E to fully understand which assets are subject to the security interest and the implications of this agreement.