What happens if the Moes Southwest Grill customer encumbers the equipment in any way?
Moes_Southwest_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
Customer will not transfer, pledge, lease, sell, hypothecate, mortgage, assign or in any other way encumber or dispose of any of the Equipment. THE PARTIES AGREE, AND CUSTOMER WARRANTS, THAT THE EQUIPMENT IS, AND WILL AT ALL TIMES REMAIN, PERSONAL PROPERTY OF COMPANY NOTWITHSTANDING THAT THE EQUIPMENT OR ANY PART THEREOF MAY NOW BE, OR HEREAFTER BECOME, IN ANY MANNER AFFIXED OR ATTACHED TO, OR EMBEDDED IN, OR PERMANENTLY RESTING UPON, REAL PROPERTY OR IMPROVEMENTS ON REAL PROPERTY.
11. REMEDIES. Upon the occurrence of any Default or at any time thereafter, Company may terminate this Lease as to any or all items of Equipment, may enter the premises where the Equipment is located and retake possession of the Equipment at Customer's expense, and will have all other remedies at law or in equity for breach of the Lease.
12. LIQUIDATED DAMAGES. If Customer acts in violation of the prohibitions described in Section 3 of this Lease, or is unable or unwilling to return the Equipment to Company in good working order, normal usage wear and tear excepted, at the expiration or termination of the Lease, Customer will pay as liquidated damages the total of (i) the amount of past-due lease payments, discounted accelerated future lease payments, and the value of Company's residual interest in the Equipment, plus (ii) all tax indemnities associated with the Equipment to which Company would have been entitled if Customer had fully performed this Lease, plus (iii) costs, interest, and attorneys' fees incurred by Company due to Customer's violation of Section 3 or its failure to return the Equipment to Company, minus (iv) any proceeds or offset from the release or sale of the Equipment by Company.
Source: Item 22 — Contracts (FDD page 92)
What This Means (2025 FDD)
According to the 2025 Moe's Southwest Grill Franchise Disclosure Document, a franchisee (referred to as 'Customer' in the lease agreement) is explicitly prohibited from encumbering the equipment in any way. Specifically, the franchisee cannot transfer, pledge, lease, sell, hypothecate, mortgage, assign, or in any other way encumber or dispose of any of the equipment. The agreement emphasizes that the equipment remains the personal property of the company, regardless of whether it becomes affixed to real property. This restriction is in place to protect the company's ownership and interests in the equipment.
If a Moe's Southwest Grill franchisee violates this prohibition, several consequences may arise. The company has the right to terminate the lease agreement for the equipment. Additionally, the company may enter the premises where the equipment is located and repossess the equipment at the franchisee's expense. Moe's Southwest Grill also has recourse to all other remedies available at law or in equity for breach of the lease.
Furthermore, if the franchisee violates the prohibition against encumbering the equipment, or is unable or unwilling to return the equipment in good working order at the end of the lease, the franchisee will be liable for liquidated damages. These damages include past-due lease payments, discounted accelerated future lease payments, the value of the company's residual interest in the equipment, all tax indemnities associated with the equipment, and any costs, interest, and attorneys' fees incurred by the company due to the franchisee's violation or failure to return the equipment. Any proceeds from the release or sale of the equipment by the company will be subtracted from the total damages.
This clause protects Moe's Southwest Grill by ensuring that its equipment remains free from any claims or liens by third parties due to the franchisee's actions. It also ensures that Moe's Southwest Grill can recover its equipment and associated costs if the franchisee fails to comply with the terms of the lease. Prospective franchisees should be aware of these restrictions and potential liabilities before entering into a franchise agreement.