What conditions trigger the conditional assignment of the lease and other assets to Chem Dry?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee hereby grants to the Franchisor a security interest in and to the Lease, all of the furniture, fixtures, inventory, equipment, and supplies located in the Site and the franchise relating to the Franchised Business, and all of the Franchisee's rights, title and interest in and to the Lease as conditional for the payment of any obligation, liability or other amount owed by the Franchisee or its affiliates to the Lessor arising under the Lease and for any default or breach of any of the terms and provisions of the Lease, and for any default or breach of any of the terms and provisions of the Franchise Agreement. In the event of a breach or default by Franchisee under the terms of the Lease, or, in the event Franchisor makes any payment to the Lessor as a result of the Franchisee's breach of the Lease, then such payment by the Franchisor, or such breach or default by the Franchisee, shall at Franchisor's option be deemed to be an immediate default under the Franchise Agreement, and the Franchisor shall be
entitled to the possession of the Site and to all of the rights, title and interest of the Franchisee in and to the Lease and to all other remedies described herein or in the Franchise Agreement or at law or in equity, without prejudice to any other rights or remedies of the Franchisor under any other agreements or under other applicable laws or equities. This Assignment shall constitute a lien on the interest of the Franchisee in and to the Lease until satisfaction in full of all amounts owed by the Franchisee to the Franchisor. In addition, the rights of the Franchisor to assume all obligations under the Lease provided in this Assignment are totally optional on the part of the Franchisor, to be exercised in its sole discretion. Franchisee agrees to execute any and all Uniform Commercial Code financing statements and all other documents and instruments deemed necessary by Franchisor to perfect or document the interests and assignments granted herein.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, the franchisee grants Chem Dry a security interest in the lease, furniture, fixtures, inventory, equipment, supplies, and the franchise itself. This conditional assignment serves as collateral for the payment of any obligation, liability, or other amount the franchisee or its affiliates owe to the lessor under the lease. It also applies to any default or breach of the lease terms, as well as any default or breach of the terms and provisions of the Franchise Agreement.
In the event the franchisee breaches or defaults on the lease, or if Chem Dry makes any payment to the lessor due to the franchisee's breach, Chem Dry can, at its option, consider this an immediate default under the Franchise Agreement. This allows Chem Dry to take possession of the site and exercise all rights, titles, and interests of the franchisee in the lease, along with other remedies available in the Franchise Agreement or at law.
This assignment acts as a lien on the franchisee's interest in the lease until all amounts owed to Chem Dry are fully paid. Chem Dry has the option, but not the obligation, to assume all responsibilities under the lease, which it can exercise at its discretion. The franchisee must also execute any Uniform Commercial Code financing statements or other documents Chem Dry deems necessary to protect the interests and assignments granted in this agreement.
This clause is common in franchising to protect the franchisor's investment and brand integrity. It allows Chem Dry to step in and maintain control over a location if the franchisee fails to meet their financial or contractual obligations, ensuring business continuity and safeguarding the brand's reputation. Prospective franchisees should understand these conditions and their implications before entering into a franchise agreement.