Under what circumstances can a Coffee News franchisee 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, a franchisee is generally prohibited from pledging or encumbering the franchise agreement. However, there is an exception: a franchisee may request written approval from Coffee News to pledge or encumber the agreement if they are seeking to sell the franchise to a third party who wants to use the franchise as collateral for purchase financing.
Approval is at Coffee News's sole discretion. If a franchisee seeks to use the franchise as collateral, they must make a written request to Coffee News. Coffee News also has the authority to extend the term of the agreement to enable a purchaser to obtain financing, should Coffee News deem it necessary.
This provision protects Coffee News by ensuring they maintain control over who becomes a franchisee and under what conditions. It also provides a mechanism for facilitating the sale of a franchise, which can be beneficial to both the franchisee and Coffee News. Prospective franchisees should consider this policy carefully, as it affects their ability to use the franchise agreement as a financial asset.