If the Franchisee finances the purchase price for a Byrider franchise assignment, to whom are the Assignee's obligations subordinate?

According to Byrider's 2025 Franchise Disclosure Document, if the franchisee or its owners finance any part of the purchase price for a Byrider franchise assignment, the assignee's obligations under promissory notes, agreements, or security interests are subordinate. This means that the assignee's obligations to pay any amounts due to Byrider, its affiliates, and third-party vendors, as well as to comply with the Franchise Agreement, take precedence over the financial obligations to the franchisee or its owners who provided the financing.

In practical terms, this subordination clause protects Byrider and its associated parties by ensuring they are first in line to receive payments and compliance from the new franchisee (assignee). If the assignee faces financial difficulties, Byrider and its vendors will be paid before the previous franchisee who financed part of the purchase. This reduces the risk for Byrider and its vendors in the event of an assignment.

For a prospective franchisee considering an assignment, it's crucial to understand this subordination. If the franchisee is financing the purchase, they need to be aware that their financial interests are secondary to Byrider's and its affiliates. This could impact their ability to recover the financed amount if the new franchisee's business struggles. Therefore, franchisees should carefully assess the financial stability and business acumen of any potential assignee before agreeing to finance the purchase price.

This type of subordination is relatively common in franchising to protect the franchisor's interests and maintain the integrity of the franchise system. However, the specific terms and conditions can vary, so it's essential for both the franchisee and assignee to thoroughly review the franchise agreement and related documents to understand their respective rights and obligations.