As a Byrider franchisee, am I allowed to encumber the Proprietary Software in any way when arranging financing for the purchase or lease of the technology system?
Byrider Franchise · 2025 FDDAnswer from 2025 FDD Document
A. Proprietary Computer Software and Starter Kit. You must license Byrider Franchising Partners' Proprietary Computer Software from Byrider Franchising Partners and enter into a Software Services and User Agreement (see Exhibit E attached to the Franchise Agreement) with Byrider Franchising Partners for ongoing service and support to the Proprietary Software and all other components of the technology system. Byrider Franchising Partners does not provide lease packages for its Proprietary Software but may provide you with a list of third parties that offer lease packages for the entire technology system as described in Item 11. Any financing you arrange for the purchase or lease of the technology system may not contain terms that encumber the Proprietary Software in any way. Under no circumstances will the ownership rights to the Proprietary Software change from Byrider Franchising Partners to you or to a third party.
Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 36–40)
What This Means (2025 FDD)
According to Byrider's 2025 Franchise Disclosure Document, when arranging financing for the purchase or lease of the technology system, a franchisee is not allowed to encumber the Proprietary Software in any way. This means that the financing terms cannot place any liens, claims, or other encumbrances on the software itself. The FDD specifies that Byrider Franchising Partners retains ownership rights to the Proprietary Software, and these rights will not transfer to the franchisee or any third party under any circumstances.
This restriction is significant because it protects Byrider's intellectual property and ensures that the software remains under their control. It also means that if a franchisee defaults on their financing, the lender cannot seize the Proprietary Software as an asset. This could limit the financing options available to franchisees, as lenders may be less willing to provide financing without being able to secure the software as collateral.
While Byrider does not offer lease packages for the Proprietary Software, they may provide a list of third parties that offer lease packages for the entire technology system. This suggests that franchisees may be able to finance the technology system as a whole, but the financing agreement must explicitly exclude the Proprietary Software from any encumbrance. Franchisees should carefully review the terms of any financing agreement to ensure compliance with this restriction.
In practical terms, a prospective Byrider franchisee needs to be aware of this restriction when planning their financing strategy. They should discuss financing options with Byrider and potential lenders to ensure that any financing arrangement complies with the requirement that the Proprietary Software cannot be encumbered. This may require exploring alternative financing structures or providing additional collateral to secure the loan.