Does the Creative World School Security Agreement include accounts as part of the Collateral?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
| 1. | Security Interest. In order to secure payment and performance in full of the obligation of | | Debtor to pay the Purchase Price, and all other obligations of Debtor to Secured Party, arising, | | under or in respect of the Franchise Agreement and this Agreement, including but not | | limited to | any extensions, modifications, substitutions, increases or renewals thereof, (ii) payment of all | | amounts advanced or incurred by Secured Party to preserve, protect, defend, and enforce its | | rights under this Agreement, the Franchise Agreement, and with respect to the Collateral, and (iii) | | payment of all fees, costs and expenses incurred by Secured Party in connection therewith (the | | "Obligations"), Debtor hereby grants to Secured Party a continuing, valid, and unavoidable | | security interest in and lien on, all of Debtor's right, title, and interest in and to all of the following | | property, wherever located, whether now owned or hereafter acquired or arising (collectively, the | | "Collateral"): | All furniture, fixtures, equipment, accessories, inventory, licenses, permits, goods, | | materials, supplies, accounts, general intangibles, and all other assets, including, | | without limitation, the Equipment and customer contracts, used in the operation of | | the | franchised | business | known | as | "Creative | World | School" | located | at | ; | | all | additions, | attachments, | accessories, | accessions, parts, fittings, and special tools now and hereafter affixed thereto | | and/or used in connection therewith, and all replacements thereof, and all | | substitutions and exchanges therefor; and all proceeds, including all cash | | proceeds and all noncash proceeds, including without limitation, proceeds of any | | and all insurance | covering any of the foregoing, and all products of any and all of | | the foregoing. |
Source: Item 23 — RECEIPTS (FDD pages 80–247)
What This Means (2025 FDD)
According to the 2025 Creative World School Franchise Disclosure Document, the Security Agreement does include accounts as part of the collateral. Specifically, the agreement grants the Secured Party a security interest in the Debtor's assets to secure the Debtor's obligation to pay the Purchase Price.
The collateral includes a wide range of assets, such as furniture, fixtures, equipment, accessories, inventory, licenses, permits, goods, materials, and supplies. Critically, it also explicitly includes 'accounts' and 'general intangibles,' indicating that the franchisor can claim rights to the franchisee's accounts receivable and other intangible assets as collateral.
This means that in the event of a default, Creative World School has a legal claim to these assets, which could significantly impact the franchisee's ability to operate the business. Prospective franchisees should carefully review the Security Agreement and understand the full scope of the collateral to assess the potential risks involved.