What does Coffee News hold as security until the Promissory Note is paid in full?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
There is no prepayment penalty. We will hold any such licensed rights to the licensed territories granted under the Coffee News License Agreement as security until you have paid your Promissory Note in full.
Source: Item 10 — Financing (FDD pages 16–17)
What This Means (2025 FDD)
According to Coffee News' 2025 Franchise Disclosure Document, when financing the purchase of additional franchise territories through Coffee News USA, Inc., the company will hold the licensed rights to those territories as security until the Promissory Note is paid in full. This means that if a franchisee borrows money from Coffee News to expand their business, Coffee News retains ownership of the rights to those additional territories until the loan is repaid.
This arrangement protects Coffee News in case of default on the loan. If the franchisee fails to make payments, Coffee News has the right to reclaim the rights to the licensed territories. This is a fairly standard practice in franchising and lending, where the lender takes a security interest in assets to mitigate their risk.
Item 23 of the FDD further clarifies that the Debtor grants the Holder (Coffee News) any and all licensed rights to the territory that was granted to Debtor in the Coffee News Franchise Agreement, to secure the payment set forth in the Promissory Note and to secure the performance of all covenants and agreements contained therein. If the franchisee fails to pay or breaches any agreement, and the issue remains unresolved for more than five days, Coffee News can demand immediate payment of the entire debt. Coffee News also has the right to sell the franchise that was granted to the Debtor in the Coffee News Franchise Agreement.