Regarding the Jersey Mikes contract, what is the Debtor warranting, covenanting, and agreeing to concerning the Collateral's use?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
A:9-101 et seq, as amended.
- 1.2 Except as otherwise herein provided, all other terms used herein shall have the meanings assigned to them in Article 9 (or, absent definition in Article 9, in a ny other Article) of the Uniform Commercial Code.
- 1.3 "Tax Refunds" means refunds or claims for refunds of any taxes at any time paid by the Debtor to the United States of America, any state, city, county, or any other governmental entity.
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- WARRANTIES, COVENANTS, AND AGREEMENTS. The Debtor warrants, covenants, and agrees as follows:
- 2.1 The Collateral has been acquired (or will be acquired) for use primarily in the business of Borrower, for a business purpose and will remain so used.
Franchisor/Company's Copy
- 2.2 Debtor shall not remove the Collateral from the Debtor's address as noted above.
- 2.3 At the time any Collateral becomes subject to a security interest in favor of the Secured Party, the Debtor shall be deemed to have warranted that (i) the Debtor is the lawful owner of such Collateral and has the right and authority to subject the same to a security interest in favor of the Secured Party and (ii) none of the Collateral is subject to any security interest other than liens in existence on or before the date of execution hereof which have been properly perfected pursuant to the appropriate state law, (such liens being referred to as the "Permitted Liens" herein) and there are no financing statements on file other than relating to Permitted Liens.
- 2.4 The Debtor shall keep adequate records of the Collateral and such other records concerning the equipment and pledged stock as the Secured Party shall determine to be necessary.
- 2.5 The Debtor shall at the request of the Secured Party (i) mark its records and the Collateral to clearly indicate the security interest of the Secured Party hereunder, and (ii) deliver to the Secured Party all accounting and other records pertaining to, and all writings evidencing, the Collateral or any portion thereof together with all books, records, and documents of the Debtor related thereto in whatever form kept by the Debtor, whether prin ted, on magnetic tape or discs or in other machine readable form, and all forms, programs, software and other materials and instructions necessary or useful to the Secured Party in connection with such accounting and other records.
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
According to Jersey Mike's 2025 Franchise Disclosure Document, the Debtor (franchisee) makes several warranties, covenants, and agreements regarding the use and maintenance of the collateral. The franchisee warrants that the collateral has been or will be acquired primarily for business use and will remain so used. This means the equipment and assets obtained through financing must be used in the operation of the Jersey Mike's restaurant. The franchisee also agrees not to remove the collateral from the address specified in the agreement. This ensures the assets remain at the restaurant location.
Additionally, the franchisee warrants their lawful ownership and right to subject the collateral to a security interest in favor of the Secured Party (franchisor or lender). They also confirm that the collateral is not subject to any other security interests except for previously disclosed and perfected liens. This protects the franchisor's interest in the collateral. The franchisee must maintain adequate records of the collateral as required by the Secured Party. This allows the franchisor to monitor the condition and value of the secured assets.
Furthermore, the franchisee is responsible for keeping the collateral in good condition, protecting it from loss, damage, or deterioration, with the exception of normal wear and tear. They must also maintain insurance against fire and other customary risks, naming the Secured Party as an additional insured and/or loss payee. This protects the franchisor's investment in case of unforeseen events. Overall, these provisions ensure the collateral is properly used, maintained, and protected, safeguarding the interests of both the franchisee and the franchisor.