Can Stretch Zone bid for and purchase the collateral during a sale?

According to Stretch Zone's 2025 Franchise Disclosure Document, Stretch Zone, as the Franchisor/Secured Party, has the right to bid for and purchase the collateral or any part of it during a sale. If Stretch Zone purchases the collateral, it becomes the owner of the collateral.

This clause in the franchise agreement outlines the rights Stretch Zone retains in the event of a franchisee's default and subsequent sale of collateral. It allows Stretch Zone to recover assets and potentially mitigate losses by purchasing the collateral. This could occur if a franchisee is unable to meet their financial obligations, leading to the seizure and sale of assets used as collateral.

For a prospective franchisee, this means that in a default situation, Stretch Zone could become a potential buyer of their business assets. This could influence the sale process and potentially affect the final value received for the assets. Franchisees should understand the implications of this clause and how it could impact them financially if they face financial difficulties during the franchise term.

Furthermore, the FDD states that Stretch Zone can sell the collateral on terms it chooses, without assuming credit risk or needing to advertise the sale. The collateral does not need to be present at the sale. These conditions provide Stretch Zone with considerable flexibility in how they handle the sale of collateral, which may not always be advantageous for the franchisee.