Upon default, does Devon Creek have the right to take possession of fixtures owned by the franchisee?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.1.4 promptly pay all sums owing to Franchisor and its affiliates. Such sums shall include all damages, costs and expenses, including reasonable attorneys' fees, incurred by Franchisor as a result of any default by Franchisee. The payment obligation herein shall give rise to and remain, until paid in full, a lien in favor of Franchisor against any and all of the personal property, furnishings, equipment,
- fixtures, and inventory or other business assets owned by Franchisee at the time of default;
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, if a franchisee defaults, Devon Creek has a right to a lien against the franchisee's business assets. Specifically, if the franchisee fails to pay all sums owed to Devon Creek and its affiliates, Devon Creek will have a lien against the franchisee's personal property, furnishings, equipment, fixtures, inventory, and other business assets. This lien remains in effect until all outstanding debts are paid in full.
This means that upon default, Devon Creek can claim a legal right to the franchisee's business assets to cover outstanding debts. This is a significant risk for franchisees, as it could lead to the loss of essential business assets needed to operate the franchise. The franchisee is responsible for all damages, costs, and expenses, including attorney's fees, incurred by Devon Creek due to the franchisee's default.
This type of clause is relatively standard in franchise agreements. It protects the franchisor's financial interests in the event of a franchisee's failure to meet their financial obligations. Prospective franchisees should carefully consider the potential financial risks and ensure they have a solid financial plan to avoid default and the potential loss of their business assets.