Is a Kitchen Solvers franchisee allowed to retain a security interest in the transferred property?
Kitchen_Solvers Franchise · 2025 FDDAnswer from 2025 FDD Document
THIS COLLATERAL ASSIGNMENT OF LEASE is made as of the last date below written by and among ("Tenant"), KS LA CROSSE INVESTMENTS, LLC ("Franchisor"), and ("Landlord").
WHEREAS, Tenant is the tenant under a certain lease (or sublease), dated (the "Lease"), wherein Landlord leased to Tenant certain premises at (the "Premises"); and WHEREAS, Tenant and have, or will, enter into a Franchise Agreement (the "Franchise Agreement"), whereby will grant to Tenant the right to open and operate a KITCHEN SOLVERS® franchised business under Franchisor's system at the Premises; and WHEREAS, as a condition to entering into the Franchise Agreement, has required that Tenant assign its right, and interest in the Lease, with the right to reassign (as provided therein), as security for Tenant's obligations and Franchisor's rights under the Franchise Agreement; and WHEREAS, in order to induce to enter into the Franchise Agreement, Tenant has agreed to assign its right, and interest in the Lease, with the right to reassign (as provided therein), as security for Tenant's obligations and Franchisor's rights under the Franchise Agreement.
NOW THEREFORE, in consideration for the foregoing premises and the mutual promises contained herein and in the Franchise Agreement, and in order to secure Tenant's obligations and Franchisor'srights under the Franchise Agreement, Tenant does hereby collaterally assign, transfer and set over unto Franchisor, with the right to reassign (as provided herein), all of its right, and interest in and to the Lease and in and to the Premises; it being nevertheless expressly understood and agreed that this assignment is made and is consented to the Landlord contingent upon the following terms, covenants, limitations and conditions: Tenant's Right to Possession.
Tenant shall retain right to possession of the 1.
Premises in accordance with the terms and conditions of the Lease until the occurrence of an Assignment Event (as defined in paragraph 2 of this Agreement).
Source: Item 22 — Contracts (FDD page 49)
What This Means (2025 FDD)
According to the 2025 Kitchen Solvers Franchise Disclosure Document, a franchisee's rights regarding security interests in transferred property are limited. Specifically, the franchisee (referred to as "Tenant" in the context of the lease) is required to assign their rights and interests in the lease to Kitchen Solvers as security for their obligations under the Franchise Agreement. This assignment is a condition for Kitchen Solvers entering into the Franchise Agreement. The franchisee's rights are subject to reassignment as provided in the agreement.
This collateral assignment of lease ensures that Kitchen Solvers has a security interest in the lease of the premises where the franchise operates. The franchisee retains the right to possess the premises, but only until an "Assignment Event" occurs, as defined in the agreement. This means that while the franchisee can initially operate the business at the leased location, Kitchen Solvers has the right to take over the lease if the franchisee fails to meet their obligations under the Franchise Agreement.
In practical terms, this arrangement protects Kitchen Solvers' interests by giving them control over the location of the franchise if the franchisee defaults. It also ensures that Kitchen Solvers can continue operating a Kitchen Solvers franchise at that location, or reassign the lease to another franchisee, thereby maintaining the brand's presence and minimizing disruption. Prospective franchisees should carefully review the definition of "Assignment Event" in the Collateral Assignment of Lease to understand the circumstances under which Kitchen Solvers can take over the lease.