What constitutes a lien on the Clear Pest Pros franchisee's interest in the lease?
Clear_Pest_Pros Franchise · 2025 FDDAnswer from 2025 FDD Document
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- if you finance any part of the sale price of the transferred interest, then (a) you agree and will assure that all of the transferee's obligations under any promissory notes or agreements are subordinate to the transferee's obligation to pay Royalties and other amounts due to us and otherwise to comply with this Agreement, (b) you will not hold any security interest reserved in the business, and (c) you will enter into a comfort letter assuring us that the transferee will meet its obligations under the Franchise Agreement, and reaffirming your guaranty of the Franchise Agreement.
Source: Item 22 — CONTRACTS (FDD pages 67–68)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the Clear Pest Pros franchise agreement addresses security interests when a franchisee finances the sale of their franchise. Specifically, if a franchisee provides financing to a transferee (buyer) through a promissory note or structured payment plan, the agreement stipulates conditions to protect the franchisor's interests.
According to the franchise agreement, the franchisee must ensure that the transferee's obligations to them are subordinate to the transferee's obligations to Clear Pest Pros. This means the new franchisee's first financial responsibility is to pay royalties and other amounts due to Clear Pest Pros and to comply with the franchise agreement. The selling franchisee cannot hold a security interest in the business that would take precedence over the franchisor's financial interests.
Furthermore, the selling franchisee is required to provide a comfort letter to Clear Pest Pros. This letter assures the franchisor that the new franchisee will meet their obligations under the Franchise Agreement and reaffirms the selling franchisee's guarantee of the Franchise Agreement. This arrangement ensures that Clear Pest Pros's financial interests are protected during and after the transfer of ownership.