What conditions must a Stretch Zone franchisee meet to use the collateral in a lawful manner?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
5. Rights of Franchisee/Debtor Prior to Default.
Until an Event of Default occurs or as otherwise provided in this Agreement, the Franchisee/Debtor may use the Collateral in any lawful manner consistent with this Agreement, the Franchise Agreement and with the terms of insurance on the Collateral.
Source: Item 3 — Franchisee/Debtor's Warranties. (FDD pages 263–364)
What This Means (2025 FDD)
According to the 2025 Stretch Zone Franchise Disclosure Document, a franchisee/debtor can use the collateral in a lawful manner if no Event of Default has occurred, or unless otherwise specified in the agreement. The franchisee's use of the collateral must be consistent with the Security Agreement, the Franchise Agreement, and the terms of insurance coverage on the collateral. This indicates that as long as the franchisee adheres to the terms of these agreements and maintains appropriate insurance, they can legally use the collateral.
Several conditions and warranties are placed on the franchisee/debtor regarding the collateral. The franchisee must own the collateral free from any liens or encumbrances, except those already permitted. They are responsible for defending the collateral against any claims. The franchisee must also maintain the collateral at the franchise business location, and cannot remove it without written consent from Stretch Zone. The franchisee is also responsible for preventing the collateral from being wasted, misused, or abused, and must ensure it is not used in violation of any laws or regulations.
Furthermore, the franchisee is required to insure the collateral with carriers and amounts satisfactory to Stretch Zone, with policies payable to Stretch Zone. These policies must provide 30 days' written notice of cancellation, modification, termination, or expiration to Stretch Zone. The franchisee must also provide Stretch Zone with copies of these insurance policies or other evidence of compliance. The franchisee is also responsible for paying all taxes and assessments on the collateral and discharging any liens or encumbrances placed against it.
These stipulations ensure that Stretch Zone maintains a secured interest in the collateral while allowing the franchisee to use it for business operations, provided they meet all specified obligations and do not default on their agreements. This protects Stretch Zone's assets and ensures the franchisee operates within legal and contractual boundaries.