In a Devon Creek franchise transfer, what agreement do the franchisee or its principal make regarding the transferee's obligations if they finance part of the sale price?

According to Devon Creek's 2024 Franchise Disclosure Document, if a franchisee or its principal finances any portion of the sale price during a transfer, they must agree that the transferee's obligations to Devon Creek take precedence over any notes, agreements, or security interests held by the franchisee or its principal. This subordination ensures that Devon Creek's financial interests are protected in the event of a transfer where the original franchisee provides financing to the new franchisee.

This requirement means that if the new franchisee defaults on their financial obligations, Devon Creek will be paid before the former franchisee or their principal. This protects Devon Creek's revenue stream and the overall financial health of the franchise system.

For a prospective Devon Creek franchisee looking to sell their franchise and provide financing to the buyer, this subordination clause is a critical consideration. It means they are taking on a higher level of risk, as their ability to recoup the financed amount is secondary to Devon Creek's claims. Franchisees should carefully evaluate the financial stability of potential transferees and understand the implications of this subordination before offering financing.