What property is considered 'Collateral' in the security interest granted to secure obligations under the Buona Franchise Agreement?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
To secure the payment and performance by Debtor of all obligations and liabilities under the Franchise Agreement (such payment and performance of such obligations and liabilities collectively, "Obligations"), Debtor shall and hereby does grant, convey, assign and transfer to Secured Party, a security interest in and to the Franchise Agreement and all signs and other appurtenances and other property, real and personal, bearing any of the Proprietary Marks used at, located on or affixed to the Franchised Business operated by Debtor ("Buona Restaurant"), and all equipment, fixtures, furnishings and improvements located at the Buona Restaurant, whether now owned or hereafter acquired by Debtor (the "Collateral").
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, the collateral securing a franchisee's obligations under the Franchise Agreement includes several categories of assets. Specifically, the security interest extends to the Franchise Agreement itself, along with all signs, appurtenances, and other real or personal property bearing Buona's proprietary marks that are used at, located on, or affixed to the franchised business. This encompasses anything displaying the Buona brand at the restaurant.
Additionally, the collateral includes all equipment, fixtures, furnishings, and improvements situated at the Buona Restaurant. This covers a broad range of items necessary for operating the business, whether the franchisee owns these items at the start of the agreement or acquires them later.
For a prospective Buona franchisee, this means that a significant portion of their business assets are pledged to Buona as security. If the franchisee fails to meet their obligations under the Franchise Agreement, Buona has the right to claim these assets. This is a fairly standard practice in franchising, as it protects the franchisor's investment and ensures the franchisee is committed to fulfilling their contractual duties.