What are 'Permitted Interests' in relation to Casa De Corazon's collateral?
Casa_De_Corazon Franchise · 2025 FDDAnswer from 2025 FDD Document
(b) Debtor has (or will have at the time Debtor acquires rights in Collateral hereafter acquired or arising) and will maintain absolute title to each item of Collateral free and clear of all security interests, liens and encumbrances, except (i) the Security Interest, (ii) purchase money security interests, (iii) security interests granted to lenders and providers of lines of credit, and (iv) security interests granted to secure the SBA Obligations (as defined in the Note), with respect to which Secured Party has agreed that the Security Interest granted hereunder will be subordinate as indicated in Section 4 below (the foregoing items in clauses (i)-(iv) are collectively referred to herein as the "Permitted Interests"), and will defend the Collateral against all claims or demands of all persons other than Secured Party and those holding Permitted Interests. Debtor will not sell or otherwise dispose of the Collateral or any interest therein; provided, however, that Debtor may sell inventory in the ordinary course of its business, as long as such proceeds of the sale are covered by the terms of this Agreement, or replace furniture and equipment with property of similar utility and equal or greater value.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2025 FDD)
According to the 2025 Casa De Corazon Franchise Disclosure Document, a franchisee's collateral must maintain absolute title, free and clear of all security interests, liens, and encumbrances. However, there are exceptions to this rule, which are referred to as 'Permitted Interests.'
Permitted Interests include the Security Interest, purchase money security interests, security interests granted to lenders and providers of lines of credit, and security interests granted to secure the SBA Obligations. Casa De Corazon has agreed that the Security Interest granted will be subordinate as indicated in Section 4.
The franchisee is responsible for defending the collateral against all claims or demands from anyone other than the Secured Party and those holding Permitted Interests. The franchisee cannot sell or dispose of the collateral, except for inventory sales in the ordinary course of business, as long as the proceeds are covered by the agreement, or replacing furniture and equipment with similar property of equal or greater value.