What is the definition of 'Event of Default' concerning the Creative World School loan agreement?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
The form of any purchase contract with the seller of a Site and any related documents, and the form of any loan agreement with or mortgage in favor of any lender and any related documents, must be approved by us before you sign them.
Our consent to them may be conditioned upon the inclusion of various terms and conditions, including the following:
(a) a provision which requires any lender or mortgagee concurrently to provide us with a copy of any written notice of deficiency or default under the terms of the loan or mortgage sent to you or your affiliates or the purchaser;
(b) a provision granting us, at our option, the right (but not the obligation) to cure any deficiency or default under the loan or mortgage (should you fail to do so) within 15 days after the expiration of a period in which you may cure such default or deficiency; and
(c) a provision which expressly states that any default under the loan or mortgage, if not cured within the applicable time period, constitutes grounds for termination of this Agreement and any default under this Agreement, if not cured within the applicable time period, also constitutes a default under the loan or mortgage.
Source: Item 23 — RECEIPTS (FDD pages 80–247)
What This Means (2025 FDD)
The Creative World School 2025 Franchise Disclosure Document addresses the conditions under which the franchisor's consent to a franchisee's financing may be contingent. Specifically, it outlines provisions related to lender notification and the franchisor's right to cure defaults.
According to the FDD, if a franchisee obtains financing for their school or site, Creative World School may require that the loan agreement includes a provision mandating the lender to provide the franchisor with copies of any default notices sent to the franchisee. This allows the franchisor to stay informed about potential financial difficulties the franchisee may be facing.
Furthermore, Creative World School may require a provision granting them the option, but not the obligation, to cure any default under the loan or mortgage if the franchisee fails to do so within a specified period. Critically, the FDD states that the loan agreement may stipulate that any uncured default under the loan constitutes grounds for termination of the Franchise Agreement, and vice versa. This interconnectedness between the loan and franchise agreements highlights the importance of financial stability for Creative World School franchisees. Prospective franchisees should carefully review these provisions with their lender and legal counsel to fully understand the implications of a loan default on their franchise agreement.