How are the proceeds from the sale of collateral applied by the Secured Party in the Jersey Mikes security agreement?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
- 3.4 The proceeds of any sale or other disposition of Collateral authorized by this Agreement shall be applied by the Secured Party first upon all expenses authorized by the Uniform Commercial Code and all reasonable attorney fees and lega l expenses incurred by the Secur ed Party; the balance of the proceeds of such sale or other disposition shall be applied in the payment of the Indebtedness, first to interest, then to principal, and the surplus, if any, shall be paid over to the Debtor or to such other person or persons as may be entitled thereto under applicable law.
The Debtor shall remain liable for any deficiency, which it shall pay to the Secured Party immediately upon demand.
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
According to Jersey Mike's 2025 Franchise Disclosure Document, the proceeds from any authorized sale or disposition of collateral are applied in a specific order by the Secured Party. First, the proceeds cover all expenses authorized by the Uniform Commercial Code, along with reasonable attorney fees and legal expenses incurred by the Secured Party.
The remaining balance from the sale is then applied to the outstanding debt (Indebtedness). This is done by first covering any interest owed, and then reducing the principal amount of the debt.
Finally, if there is any surplus remaining after covering the expenses, interest, and principal, the surplus is paid to the Debtor (the franchisee) or any other person legally entitled to it under applicable law. However, the franchisee remains liable for any deficiency, which they must pay to the Secured Party immediately upon demand.