What is a Jack In The Box franchisee prohibited from permitting with respect to tax obligations?
Jack_In_The_Box Franchise · 2025 FDDAnswer from 2025 FDD Document
Until the Purchase Price is paid in full, Franchisee warrants that Franchisee (a) will properly maintain, repair and preserve the Collateral and insure the same against loss; (b) will pay all taxes that may become a lien on the Collateral; (c) will not sell, contract to sell, lease, encumbrance or other dispose of the Collateral nor change its physical location from the Jack in the Box restaurant premises to which it was delivered; (d) will sign any additional agreements, assignments or documents that
may be deemed necessary or advisable by Franchisor to effectuate the purpose of this Agreement and the protection of the Collateral.
Source: Item 23 — RECEIPT (FDD pages 94–634)
What This Means (2025 FDD)
According to the 2025 Jack In The Box Franchise Disclosure Document, as a condition of maintaining the collateral for any purchase price not yet paid in full, a franchisee is prohibited from allowing any tax to become a lien on the collateral. This means the franchisee must ensure all taxes related to the collateral (likely property taxes on equipment or the restaurant itself) are paid on time to prevent the government from placing a legal claim on the assets.
This requirement protects Jack In The Box's financial interest in the collateral. If a franchisee fails to pay taxes and a lien is placed on the collateral, it could jeopardize Jack In The Box's ability to recover the assets in case of franchisee default or business failure. The franchisee bears the responsibility of managing their finances and ensuring tax compliance to avoid such situations.
This is a fairly standard clause in franchise agreements where the franchisor retains a security interest in assets. It underscores the importance of sound financial management for franchisees. Failing to meet this obligation could lead to penalties, loss of assets, and ultimately, termination of the franchise agreement.