Can a Coffee News franchisee pledge the franchise agreement without the franchisor's approval?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
- 8.14 The sale of Franchise by Franchisee.
Franchisee agrees not to pledge or encumber this Agreement except with the express written approval of Franchisor, to be granted in the Franchisor's sole discretion, which Franchisee may request in the event that Franchisee seeks to sell the Franchise granted hereunder to a third party who desires to use said Franchise as collateral for purchase financing.
Franchisor shall have the authority to extend the term of this Agreement beyond the term set forth in paragraph 3 to enable a purchaser of the Franchise to obtain financing of said purchase if Franchisor, in his sole discretion, determines such extension to be necessary.
Franchisee may request approval of the use of the Franchise granted hereunder as collateral and/or the extension of the term of this Agreement by written request sent to address provided under paragraph 14.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to Coffee News's 2025 Franchise Disclosure Document, a franchisee is not allowed to pledge or encumber the franchise agreement without express written approval from Coffee News. This requirement is detailed in section 8.14 of Item 23.
This means that if a Coffee News franchisee wants to use their franchise agreement as collateral, for example, to secure financing, they must first obtain written permission from Coffee News. The franchisor has sole discretion over whether to grant this approval.
However, Coffee News retains the authority to extend the agreement's term to enable a purchaser to obtain financing if the franchisee seeks to sell the franchise to a third party who wants to use the franchise as collateral for purchase financing. The franchisee can formally request approval for using the franchise as collateral or extending the agreement's term by sending a written request to the address provided in paragraph 14.