Who grants approval for a Coffee News franchisee to pledge or encumber the franchise agreement?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
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, the franchisor must provide express written approval before a franchisee can pledge or encumber their franchise agreement. This approval is granted at the franchisor's sole discretion.
This stipulation means that as a Coffee News franchisee, you cannot use your franchise agreement as collateral for any financial obligations without first obtaining explicit written permission from Coffee News. This requirement protects Coffee News by ensuring they maintain control over who is associated with their brand and under what conditions the franchise operates.
The FDD specifies that a franchisee might request this approval if they intend to sell their franchise to a third party who wants to use the franchise as collateral for financing the purchase. Furthermore, Coffee News has the authority to extend the term of the agreement to enable a purchaser to obtain financing if they deem it necessary. To request approval, a franchisee must send a written request to the address provided in paragraph 14 of the agreement.
This provision is fairly standard in franchising, as franchisors typically want to oversee any changes in financial obligations or ownership that could impact the brand's reputation or the franchisee's ability to operate effectively. Prospective franchisees should consider this restriction when planning their financing and exit strategies.