What happens if a Pearce Bespoke franchisee finances part of the purchase price for a transfer?

According to Pearce Bespoke's 2025 Franchise Disclosure Document, if a franchisee finances any part of the purchase price for a transfer, the transferee-franchisee's obligations to Pearce Bespoke take precedence. Specifically, the transferee-franchisee's obligations under any promissory notes, agreements, or security interests related to the franchise are subordinate to their obligation to pay Royalty Fees or any other amounts due to Pearce Bespoke under the Franchise Agreement. This means that Pearce Bespoke will be paid before the original franchisee is paid.

This clause protects Pearce Bespoke's revenue stream in the event of a transfer involving financing. If the new franchisee encounters financial difficulties, Pearce Bespoke ensures its royalties and fees are prioritized over the repayment of the financing provided by the selling franchisee. This reduces the risk to Pearce Bespoke that a financially distressed franchisee will be unable to meet their ongoing financial obligations to the company.

For a franchisee considering financing a transfer, this condition introduces a significant risk. The selling franchisee essentially takes a secondary position to Pearce Bespoke in terms of repayment priority. Therefore, the franchisee should carefully assess the creditworthiness and financial stability of the potential buyer before agreeing to finance any portion of the purchase price. It would be prudent to seek legal and financial advice to fully understand the implications of this subordination and to potentially mitigate the risk through appropriate security arrangements or guarantees.