Does the restriction on transferring interests in the Dryer Vent Squad franchise prohibit granting a security interest to secure financing for initial development?
Dryer_Vent_Squad Franchise · 2024 FDDAnswer from 2024 FDD Document
3. SECURITY. This note shall be secured under the following:
The Borrower agrees to provide their Dryer Vent Squad Business franchise rights, the purpose for which this loan was issued, and all related business assets including but not limited to office equipment, lease, phone numbers and customer base, referred to as the "Security", which shall transfer to the possession and ownership of the Lender IMMEDIATELY if this Note should be in default. The Security may not be sold or transferred without the Lender's consent during the course of this Note. If the Borrower breaches this provision, Lender may declare all sums due under this Note immediately due and payable, unless prohibited by applicable law.
If the Borrower defaults under this Note the Lender shall have the right to obtain ownership and possession of the Security. The Lender shall have the sole-option to accept it as full payment for the Borrowed Money without further liabilities or obligations. If the market value of the Security does not exceed the Borrowed Money, the Borrower shall remain liable for the balance due while accruing interest at the maximum rate allowed by law.
Source: Item 23 — RECEIPTS (FDD pages 51–207)
What This Means (2024 FDD)
According to the 2024 Dryer Vent Squad FDD, a Dryer Vent Squad franchisee is required to provide their Dryer Vent Squad Business franchise rights as security for a loan. The franchise rights, along with all related business assets including but not limited to office equipment, lease, phone numbers and customer base, will transfer to the lender immediately if the note should be in default.
The Dryer Vent Squad franchisee is not allowed to sell or transfer the security without the lender's consent during the course of the note. If the franchisee breaches this provision, the lender may declare all sums due under the note immediately due and payable, unless prohibited by applicable law.
If the Dryer Vent Squad franchisee defaults under the note, the lender has the right to obtain ownership and possession of the security. The lender has the sole option to accept it as full payment for the borrowed money without further liabilities or obligations. If the market value of the security does not exceed the borrowed money, the franchisee remains liable for the balance due while accruing interest at the maximum rate allowed by law.