Does the Mr. Sandless security interest extend to future liabilities and indebtedness?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
The Security Interest is to secure payment of the following (the "Indebtedness"):
- 28.2.1 All amounts due under this Agreement or otherwise by you;
- 28.2.2 All sums which we may, at our option, expend or advance for the maintenance, preservation, and protection of the Collateral, including, without limitation, payment of rent, taxes, levies, assessments, insurance premiums, and discharge of liens, together with interest, or any other property given as security for payment of the Indebtedness;
- 28.2.3 All expenses, including reasonable attorneys' fees, which we incur in connection with collecting any or all Indebtedness secured hereby or in enforcing or protecting our rights under the Security Interest and this Agreement; and
- 28.2.4 All other present or future, direct or indirect, absolute or contingent, liabilities, obligations, and indebtedness of you to us or third parties under this Agreement, however created, and specifically including all or part of any successor agreement or extension of this Agreement, whether or not you execute any extension agreement or successor agreement.
28.2.5 Our security interest, as described herein, shall be subordinated to any financing related to your operation of the Business, including, but not limited to, a real property mortgage and equipment leases.
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2025 FDD)
According to Mr. Sandless's 2025 Franchise Disclosure Document, the security interest granted to Mr. Sandless extends to both present and future liabilities, obligations, and indebtedness of the franchisee. This includes all amounts due under the Franchise Agreement or otherwise, sums expended by Mr. Sandless for the maintenance, preservation, and protection of the collateral, and all expenses incurred in collecting any indebtedness or enforcing rights under the security interest.
Specifically, the security interest covers all present or future, direct or indirect, absolute or contingent liabilities, obligations, and indebtedness of the franchisee to Mr. Sandless or third parties under the Franchise Agreement. This encompasses any successor agreement or extension of the Franchise Agreement, regardless of whether a formal extension agreement is executed.
However, the FDD also states that Mr. Sandless's security interest is subordinated to any financing related to the franchisee's operation of the business. This subordination includes, but is not limited to, a real property mortgage and equipment leases. This means that in the event of default, these financing arrangements would take precedence over Mr. Sandless's security interest.