Under what circumstances might Hyper Kidz expend or advance sums for the maintenance, preservation, and protection of collateral related to a Hyper Kidz franchise?
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;
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, Hyper Kidz may expend or advance sums for the maintenance, preservation, and protection of the collateral related to a Hyper Kidz franchise. This can occur to cover payment of rent, taxes, levies, assessments, insurance premiums, and discharge of liens, along with interest, or any other property given as security for payment of the franchisee's indebtedness. The franchisee grants Hyper Kidz a Security Interest in all furniture, fixtures, equipment, signage, and realty of the Hyper Kidz Business, including interests in real and personal property leases, additions, substitutions, replacements, proceeds, and products. All these items are considered the "Collateral."
The security interest serves to secure the payment of all amounts due under the Franchise Agreement or otherwise by the franchisee. It also covers all expenses, including reasonable attorneys' fees, that Hyper Kidz incurs in connection with collecting any indebtedness or in enforcing or protecting its rights under the Security Interest and the Franchise Agreement. This extends to all present or future, direct or indirect, absolute or contingent liabilities, obligations, and indebtedness of the franchisee to Hyper Kidz or third parties under the Agreement, including any renewal or extension of the Agreement.
This means that if a Hyper Kidz franchisee fails to meet their financial obligations, Hyper Kidz has the right to step in and protect the assets (Collateral) of the business by paying outstanding debts like rent, taxes, or insurance. These advanced sums then become part of the franchisee's debt to Hyper Kidz, secured by the Security Interest in the Collateral. However, Hyper Kidz's security interest is subordinated to any financing related to the franchisee's operation of the Hyper Kidz Business, such as a real property mortgage and equipment leases.