Does Christian Brothers Automotive have sole discretion to approve or disapprove loan requests?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
13.04 No Encumbrance. Franchisee shall not have the right to pledge, encumber, hypothecate or otherwise give any third party a security interest in this Agreement or the license or rights granted hereunder in any manner whatsoever without the express prior written consent of Franchisor, which permission may be withheld for any reason whatsoever in Franchisor's sole subjective judgment. Additionally, Franchisee shall not pledge, encumber, hypothecate or otherwise give any third party a security interest in the Franchised Business, except to a lender in connection with a business loan approved by Franchisor.
Source: Item 10 — FINANCING (FDD pages 39–40)
What This Means (2025 FDD)
According to the 2025 Christian Brothers Automotive Franchise Disclosure Document, Christian Brothers Automotive retains the right to approve or disapprove loan requests. Specifically, the franchisee is restricted from giving any third party a security interest in the Franchised Business without prior written consent from Christian Brothers Automotive. This permission can be withheld for any reason, based on Christian Brothers Automotive's subjective judgment. This clause ensures that Christian Brothers Automotive maintains control over the financial obligations and security interests related to its franchised businesses.
This requirement means a prospective Christian Brothers Automotive franchisee needs to secure approval from Christian Brothers Automotive before obtaining any business loan that uses the franchise as collateral. Christian Brothers Automotive has broad discretion in deciding whether to grant this approval.
This provision is designed to protect the Christian Brothers Automotive brand and system from potential financial risks associated with franchisee debt. However, it also means that franchisees have limited flexibility in securing financing and must align their financial strategies with Christian Brothers Automotive's requirements.