Is after-acquired inventory subject to Degree Wellness's lien?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
To secure your performance under this Agreement and indebtedness for all sums due us or our affiliates, we shall have a lien upon, and you hereby grant us a security interest in, the following collateral and any and all additions, accessions, and substitutions to or for it and the proceeds from all of the same: (a) all inventory now owned or after-acquired by the Franchise, including but not limited to all inventory and supplies transferred to or acquired by you in connection with this Agreement; (b) all accounts of the Franchise now existing or subsequently arising, together with all interest in the Franchise, now existing or subsequently arising, together with all chattel paper, documents, and instruments relating to such accounts; (c) all contract rights of the Franchise, now existing or subsequently arising including, without limitation, accounts receivable and other contractual rights to payment from others; (d) all general intangibles of the Franchise, now owned or existing, or after-acquired or subsequently arising including, without limitation, all awards, damages, payments, escrowed monies, insurance proceeds, and interest, fees, charges or payments accruing on or received from or to be received on any of the foregoing in any way; and (e) all products, proceeds, substitutions, and replacements of any of the above described collateral.
You agree to execute such financing statements, instruments, and other documents, in a form satisfactory to us, that we deem necessary so that we may establish and maintain a valid security interest in and to these assets, and you authorize us to file, without your signature, such financing statements as we shall deem necessary or advisable to reflect the security interest granted herein.
Source: Item 23 — Receipts (FDD pages 66–257)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, the franchise agreement stipulates that Degree Wellness will have a lien upon the franchisee's collateral. This collateral includes all inventory currently owned by the franchisee, as well as any inventory acquired in the future. This also extends to any additions, accessions, substitutions, or proceeds related to the inventory.
This means that Degree Wellness has a security interest in the franchisee's inventory, both present and future, to ensure the franchisee fulfills their obligations under the agreement, including any debts owed to Degree Wellness or its affiliates. The franchisee is required to execute any necessary financing statements or documents to establish and maintain this security interest. Degree Wellness is also authorized to file these statements without the franchisee's signature if deemed necessary.
For a prospective Degree Wellness franchisee, this clause signifies that the franchisor has a legal claim on the inventory to secure the franchisee's performance and financial obligations. This is a common practice in franchising, as it protects the franchisor's interests in the event of franchisee default or non-compliance. Franchisees should be aware of this lien and understand its implications for their business operations and financial obligations.