Under what conditions does a Crave Cookies franchisee need to comply with the terms of their loan?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
- 15.7 No Lien on Agreement. Franchisee shall not grant a security interest in this Agreement to any person or entity. If Franchisee grants an "all assets" security interest to any lender or other secured party, Franchisee shall cause the secured party to expressly exempt this Agreement from the security interest.
Source: Item 22 — CONTRACTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, a franchisee must comply with the terms of their loan if they grant an "all assets" security interest to a lender. In this case, the franchisee must ensure that the secured party expressly exempts the Franchise Agreement from the security interest. This means that while a franchisee can obtain financing for their Crave Cookies business, they cannot use the Franchise Agreement itself as collateral.
This requirement protects Crave Cookies by preventing the Franchise Agreement from being controlled by a lender if the franchisee defaults on their loan. If the Franchise Agreement were included in the security interest, the lender could potentially take over the franchise or transfer it to another party without Crave Cookies' approval, which could negatively impact the brand.
This stipulation is fairly common in franchising. Franchisors typically want to maintain control over who operates their franchises and ensure that any transfer of ownership meets their standards. By preventing the Franchise Agreement from being used as collateral, Crave Cookies retains the right to approve any potential new franchisees, even in the event of a loan default.
Prospective Crave Cookies franchisees should be aware of this restriction when seeking financing. They will need to ensure that any loan agreements specifically exclude the Franchise Agreement from the assets used as security. This may require negotiating with lenders to find alternative forms of collateral or adjust the loan terms accordingly.