Are insurance proceeds related to the Degree Wellness franchise subject to a lien?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
- 17.4 Lien.
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, insurance proceeds are subject to a lien. Degree Wellness is granted a security interest in various forms of collateral to secure the franchisee's performance and indebtedness. This collateral includes all general intangibles of the franchise, encompassing awards, damages, payments, escrowed monies, insurance proceeds, and any related interest, fees, charges, or payments. This means that if a Degree Wellness franchisee owes money to Degree Wellness or its affiliates, Degree Wellness has a legal claim against the franchisee's insurance proceeds to cover those debts.
This security interest extends to all products, proceeds, substitutions, and replacements of the described collateral. The franchisee is obligated to execute financing statements and other necessary documents to establish and maintain Degree Wellness's valid security interest in these assets. Furthermore, the franchisee authorizes Degree Wellness to file these financing statements without requiring the franchisee's signature, ensuring that Degree Wellness can properly reflect its security interest.
For a prospective Degree Wellness franchisee, this means that any insurance payouts related to the franchise could be used to settle outstanding debts owed to Degree Wellness. It is important for franchisees to understand the full scope of this lien and security interest, as it could impact their ability to access and use insurance funds in the event of a claim. Franchisees should seek legal counsel to fully understand the implications of this clause and how it may affect their business operations and financial obligations.