Does the Petro Stopping Center franchise agreement constitute a lien on the franchisee's interest in the lease?
Petro_Stopping_Center Franchise · 2025 FDDAnswer from 2025 FDD Document
5.4 Security Interest/Assignment.
(a) Grant: By signing this Agreement you:
(i) grant to us, a first priority security interest in the Collateral, which interest we will agree to subordinate to an Approved Financing, which has met the requirements set forth in Section 4.4, in the form of an agreement with your lender that we approve.
Source: Item 14 — Other investments (FDD pages 131–208)
What This Means (2025 FDD)
According to the 2025 Petro Stopping Center Franchise Disclosure Document, the franchise agreement does constitute a lien on the franchisee's interest in the lease. By signing the franchise agreement, the franchisee grants Petro Stopping Center a first priority security interest in the collateral, which includes the lease.
This security interest is subject to subordination to an approved financing that meets specific requirements outlined in Section 4.4 of the franchise agreement. This means that if the franchisee obtains financing from a lender that Petro Stopping Center approves, Petro Stopping Center will agree to make its security interest secondary to the lender's interest. This subordination is formalized through an agreement between Petro Stopping Center and the franchisee's lender.
The FDD also states that the definition of "Collateral" includes the lease for the Petro Stopping Center location. This gives Petro Stopping Center certain rights and powers, including the ability to take possession of the site, operate the business, and even terminate unauthorized agreements or subleases. These measures are designed to protect Petro Stopping Center's interests in the event of a default by the franchisee.
Specifically, Petro Stopping Center retains the right to revise or add provisions to the Lease Assignment based on the terms of the franchisee's lease. The franchisee's failure to provide a fully executed copy of the Lease Assignment within three business days of the full execution of their lease constitutes a breach of the Franchise Agreement. This underscores the importance of adhering to Petro Stopping Center's requirements regarding the lease and its assignment.