Does Crave's security interest extend to future liabilities and obligations of the franchisee?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
The Security Interest is to secure payment of the following (the "Indebtedness"):
- 20.2.1 All amounts due under this Agreement or otherwise by you;
- 20.2.2 All sums which we may, at our option, expend or advance for the maintenance, preservation, and protection of the Collateral, including, without limitation, payment of rent, taxes, levies, assessments, insurance premiums, and discharge of liens, together with interest, or any other property given as security for payment of the Indebtedness;
- 20.2.3 All expenses, including reasonable attorneys' fees, which we incur in connection with collecting any or all Indebtedness secured hereby or in enforcing or protecting our rights under the Security Interest and this Agreement; and
- 20.2.4 All other present or future, direct or indirect, absolute or contingent, liabilities, obligations, and indebtedness of you to us or third parties under this Agreement, however created, and specifically including all or part of any successor term or extension of this Agreement, whether or not you execute any extension agreement or successor instruments.
Our security interest, as described herein, shall be subordinated to any financing related to your operation of the Franchised Business, including, but not limited to, a real property mortgage and equipment leases.
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, the security interest granted to Crave does extend to the franchisee's future liabilities and obligations. Crave is granted a Security Interest in the franchisee's furniture, fixtures, equipment, signage, realty, and leases related to the Franchised Business, including any property acquired later. This Collateral serves to secure the Indebtedness.
The Indebtedness includes all amounts due under the Franchise Agreement, any sums Crave expends to maintain the Collateral (such as rent, taxes, insurance), legal fees incurred to collect debts or protect their rights, and all present or future liabilities and obligations of the franchisee to Crave or third parties. This encompasses any extensions or successor terms of the Franchise Agreement, regardless of whether a formal extension agreement is executed.
This means that Crave's security interest is comprehensive, covering not only current debts but also any future financial responsibilities the franchisee may incur. However, Crave's security interest is subordinated to any financing related to the franchisee's operation of the Franchised Business, such as a real property mortgage and equipment leases. This subordination provides some protection to the franchisee by ensuring that primary financing arrangements take precedence over Crave's security interest.