Does the lien granted to Degree Wellness under the Degree Wellness Agreement extend to after-acquired inventory?
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, Degree Wellness is granted a lien on the franchisee's inventory, including after-acquired inventory. This means that the security interest extends not only to the inventory the franchisee owns at the time of signing the agreement but also to any inventory acquired later during the term of the agreement. This lien serves to secure the franchisee's performance under the agreement and any debts owed to Degree Wellness or its affiliates.
The collateral subject to the lien includes all inventory, both currently owned and after-acquired, accounts of the franchise, contract rights, general intangibles, and proceeds from the aforementioned items. This broad definition of collateral gives Degree Wellness a comprehensive security interest in the franchisee's business assets.
As a franchisee, you must execute financing statements and other documents to establish and maintain Degree Wellness's security interest. Degree Wellness is authorized to file these statements without your signature. This provision underscores the importance of understanding the full scope of the security interest and the obligations it places on the franchisee.
This type of security interest is a common practice in franchising, allowing the franchisor to protect its financial interests in the event of franchisee default. However, prospective franchisees should carefully consider the implications of granting such a broad lien on their assets and seek legal counsel to fully understand their obligations.