What is the spendthrift provision related to the Coffee News license?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
. In no event shall any monies _, 20, which is called the "maturity date." by time without penalty. | | month until he/she have paid all of the | | | described above that he/she may owe ur | |
The Debtor acknowledges and hereby agrees to grant Holder, with any and all the licensed rights to the territory that was granted to Debtor in the foregoing Coffee News Franchise Agreement, to secure the payment set forth in this Promissory Note and to secure the performance of all covenants and agreements contained herein. In the event of a failure to pay interest, principal or any other amount due on this Promissory Note in accordance with its terms, or of a breach of any other covenant, condition or agreement contained herein, remaining uncured for a period in excess of five (5) days (except that no grace period shall be permitted for a default under this Note or the foregoing Coffee News Franchise Agreement), or any breach in the covenants, conditions or agreements in any instrument given in connection with the Promissory Note and debt secured hereby, or if a proceeding in bankruptcy, receivership or insolvency shall be instituted by or against the undersigned, or if the foregoing Coffee News Franchise Agreement for which the parties have entered into this Promissory Note is terminated for any reason, then the entire debt secured hereby, together with all charges to which Holder would be entitled under the Promissory Note or by law if the Promissory Note were prepaid in full, shall be due and payable, Holder shall have the right to realize upon the security granted herein, and the payment and acceptance of any sum on account of this note shall not be considered a waiver of such right of election. The failure at any time of Holder to exercise this option shall not constitute a waiver of
the right to exercise the right at any other time.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, the spendthrift provision dictates the actions that can be taken if a franchisee defaults on their financial obligations. Specifically, if a franchisee (referred to as the Debtor) fails to make payments on a Promissory Note or breaches any agreements, and the issue remains unresolved for more than five days, the holder of the note (Holder) has rights regarding the Coffee News franchise. This also applies if bankruptcy, receivership, or insolvency proceedings are initiated by or against the franchisee, or if the Coffee News Franchise Agreement is terminated for any reason.
In such cases, the entire debt becomes immediately due, and the Holder can exercise their right to the security granted, including selling the Coffee News franchise. The provision clarifies that accepting any payment does not waive the Holder's right to pursue these actions. Furthermore, the failure to exercise this option at one time does not prevent the Holder from doing so in the future.
This means that a prospective Coffee News franchisee should understand that their franchise agreement can be used as security for financial obligations. Defaulting on these obligations can lead to the loss of the franchise. This is a significant risk to consider, as it ties the franchise's value directly to the franchisee's financial performance and adherence to the agreement's terms.