What security interest does the Clear Pest Pros franchisee grant to the franchisor?
Clear_Pest_Pros Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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)
According to the 2025 FDD, Clear Pest Pros franchisees are restricted from holding a security interest in the business under specific circumstances. If a franchisee finances any part of the sale price when transferring their franchise, they must ensure that the transferee's obligations to them are subordinate to the transferee's obligations to Clear Pest Pros.
Specifically, the franchisee cannot hold any security interest in the business in this scenario. Additionally, the franchisee must provide a comfort letter to Clear Pest Pros, assuring that the transferee will meet their obligations under the Franchise Agreement and reaffirming the franchisee's guarantee of the Franchise Agreement.
This provision protects Clear Pest Pros's financial interests by ensuring that its royalties and other payments take priority over any financing arrangements between the franchisee and a third-party transferee. This is a fairly standard practice in franchising, designed to maintain the franchisor's revenue stream and control over the franchise system, even during ownership transitions.