As a Mr. Sandless franchisee, is the Franchise Agreement considered a Security Agreement and Financing Statement?

Based on the 2025 Mr. Sandless Franchise Disclosure Document, the franchise agreement itself is not explicitly defined as a security agreement or financing statement. However, the document does state that the franchisee may acquire rights or interests in certain domain names, social media accounts, software accounts, and telephone listings related to the Mr. Sandless franchised business or the marks. These are considered "Electronic Advertising" and "Telephone Listings" respectively. Upon termination of the franchise agreement, the franchisee must transfer these assets back to the franchisor. This transfer provision could be interpreted as having some characteristics similar to a security agreement, as it ensures the franchisor's control over key brand-related assets. However, the FDD does not use the specific terms 'security agreement' or 'financing statement' in this context.

The Mr. Sandless FDD includes an Internet Advertising, Social Media, Software and Telephone Listing Agreement as Attachment 5. This agreement likely outlines the terms and conditions regarding the franchisee's use and transfer of these digital assets. It is important for prospective franchisees to carefully review this agreement to understand their obligations and the franchisor's rights concerning these assets, especially upon termination of the franchise agreement.

While the Franchise Agreement and related documents do not explicitly state that the agreement is a security agreement or financing statement, the provisions regarding the transfer of digital assets upon termination have similar implications. A prospective franchisee should consult with a legal professional to fully understand the nature of these provisions and their potential impact. Specifically, they should inquire about whether these provisions could be interpreted as creating a security interest in favor of the franchisor and what steps, if any, need to be taken to perfect that interest.