What is the role of the SBA in the Learningrx franchisee's loan?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
| Recitals. assisted financing. | Franchisor and Franchisee entered into a Franchise (or License) Agreement on (Franchise Agreement). The Franchisee agreed among other things to operate and maintain a franchise located at Franchisee has obtained from a lender a loan (Loan) in which funding is provided with the assistance of the United States Small Business Administration (SBA). SBA requires the execution of this Addendum as a condition for obtaining the SBA |
|---|---|
| NOW, THEREFORE, in consideration of the mutual promises below, and for good and valuable considerations in hand paid by each of the parties to the others, the receipt and sufficiency of which the parties acknowledge, the parties agree as follows: | |
| • | The Franchise Agreement is in full force and effect, and Franchisor has sent no official notice of default to Franchisee under the Franchise Agreement that remains uncured on the date hereof. |
| • | Franchisor will not unreasonably withhold, delay or condition its consent to any proposed transfer or assignment by Franchisee which requires Franchisor's consent under Section 14.4 of the Franchise Agreement. |
| • | In the event of a disability or incompetency, the franchisee's representative will be able to transfer the franchise subject to the franchisor's consent which will not be unreasonably withheld. |
| • | This Addendum automatically terminates on the earliest to occur of the following: (i) a Termination occurs under the Franchise Agreement; (ii) the Loan is paid; or (iii) SBA no longer has any interest in the SBA financing. |
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
According to Learningrx's 2025 Franchise Disclosure Document, the Small Business Administration (SBA) plays a role in the franchisee's loan. Specifically, the FDD mentions that the franchisee may obtain a loan with the assistance of the SBA. The execution of an addendum is required by the SBA as a condition for obtaining SBA funding. This addendum outlines certain agreements between Learningrx and the franchisee in relation to the SBA loan.
The addendum includes stipulations such as Learningrx agreeing not to unreasonably withhold consent for franchise transfers or assignments by the franchisee, especially in cases of disability or incompetency. This suggests that the SBA wants to ensure the franchise can continue operating even under unforeseen circumstances, safeguarding their investment in the loan. The addendum also specifies conditions under which it automatically terminates, including when the loan is paid off or when the SBA no longer has an interest in the financing.
This arrangement benefits the Learningrx franchisee by facilitating access to funding that might otherwise be unavailable. The SBA's involvement can provide lenders with additional security, making them more willing to offer loans to franchisees. However, it also means that the franchisee must comply with the SBA's requirements, including the execution of the addendum and adherence to its terms. The presence of this addendum indicates that the SBA has a vested interest in the ongoing operation and transferability of the Learningrx franchise, adding a layer of oversight to the franchise agreement.