Does the Security Interest granted to Hyper Kidz extend to property acquired after the initial establishment of the Hyper Kidz Business?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
t and maintenance of the Business in your absence. In the event of our exercise of the Step-In Rights**,** you agree to hold harmless us and our representatives for all
actions occurring during the course of such temporary operation. You agree to pay all of our reasonable attorneys' fees and costs incurred as a consequence of our exercise of the Step-In Rights. Nothing contained herein shall prevent us from exercising any other right which we may have under this Agreement, including, without limitation, termination.
ARTICLE 23: SECURITY INTEREST
23.1 Collateral
You grant to us a security interest ("Security Interest") in all of the furniture, fixtures, equipment, signage, and realty (including your interests under all real property and personal property leases) of the Hyper Kidz Business, together with all similar property now owned or hereafter acquired, additions, substitutions, replacements, proceeds, and products thereof, wherever located, used in connection with the Hyper Kidz Business. All items in which a security interest is granted are referred to as the "Collateral".
23.2 Indebtedness Secured
The Security Interest is to secure payment of the following (the "Indebtedness"):
- 23.2.1 All amounts due under this Agreement or otherwise by you;
- 23.2.2 All sums which we may, at our option, expend or advance for the maintenance, preservation, and protection of the Collateral, including, without limitation, payment of rent, taxes, levies, assessments, insurance premiums, and discharge of liens, together with interest, or any other property given as security for payment of the Indebtedness;
- 22.2.3 All expenses, including reasonable attorneys' fees, which we incur in connection with collecting any or all Indebtedness secured hereby or in enforcing or protecting our rights under the Security Interest and this Agreement; and
- 23.2.4 All other present or future, direct or indirect, absolute or contingent, liabilities, obligations, and indebtedness of you to us or third parties under this Agreement, however created, and specifically including all or part of any renewal or extension of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, the security interest granted to Hyper Kidz does extend to property acquired after the initial establishment of the Hyper Kidz Business. Hyper Kidz is granted a security interest in all furniture, fixtures, equipment, signage, and realty used in connection with the Hyper Kidz Business. This includes all similar property now owned or hereafter acquired, additions, substitutions, replacements, proceeds, and products thereof, wherever located.
This means that Hyper Kidz has a legal claim on not only the initial assets of the franchise but also any new assets purchased or obtained throughout the duration of the franchise agreement. This security interest ensures that Hyper Kidz has collateral to secure payment of all amounts due under the agreement, any sums expended by Hyper Kidz for the maintenance and protection of the collateral, all expenses incurred in collecting any indebtedness, and all other present or future liabilities of the franchisee to Hyper Kidz.
However, the security interest granted to Hyper Kidz is subordinated to any financing related to the franchisee's operation of the Hyper Kidz Business, including a real property mortgage and equipment leases. This subordination protects the interests of lenders who provide financing to the franchisee for the operation of the business. Franchisees are also required to execute additional documents and financing statements as required by Hyper Kidz to perfect the security interest under the Uniform Commercial Code.