If Stretch Zone sells the collateral, does it have to advertise or give notice of any kind?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
bly convenient to Franchisee/Debtor to assemble the Collateral.
- (d) The Franchisee/Debtor agrees that a notice to the Franchisee/Debtor, at least 5 days before the time of any intended sale or of the time after which any public or private sale or other disposition of the Collateral may be made, is reasonable notice of the sale or other disposition.
- (e) Without precluding any other methods of sale, the sale of the Collateral has been made in a commercially reasonable manner if conducted in conformity with reasonable commercial practices, however, the Franchisor/Secured Party may sell on terms as it may choose, without assuming any credit risk and without any obligation to advertise or give notice of any kind.
- (f) The Collateral need not be present at any public or private sale or in view of the purchaser or purchasers. Title passes upon sale wherever the property is located with like effect as though all the property were present and in the possession of the person conducting the sale and where physically delivered to the purchaser. The Franchisor/Secured Party may bid for and purchase all the Collateral or any part of the Collateral, and by purchase, becomes the owner of the Collateral.
- (g) Upon the exercise of any of the rights or remedies of the Franchisor/Secured Party under this Agreement, the Collateral may be offered for sale for one total price, and the proceeds of the sale accounted for in one account without distinction between items of security or without assigning to them any proportion of the proceeds of the sale. The Franchisee/Debtor insofar as it legally may do so waives the application of any doctrine of marshalling. At the option of the Franchisor/Secured Party, the Collateral may be offered for sale separately at different times and/or locations.
Source: Item 3 — Franchisee/Debtor's Warranties. (FDD pages 263–364)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, as a franchisee/debtor, you agree to receive a minimum of 5 days' notice before any intended sale or disposition of the collateral. However, Stretch Zone as the Franchisor/Secured Party, has the right to sell the collateral without any obligation to advertise or give notice of any kind. This means that Stretch Zone can sell the collateral on terms they choose, without assuming any credit risk.
Stretch Zone can conduct the sale following reasonable commercial practices, but they are not obligated to advertise the sale or provide any specific notice beyond the initial 5-day notice. The collateral does not need to be present at the sale or in view of potential purchasers. Furthermore, Stretch Zone has the right to bid for and purchase the collateral themselves, becoming the owner upon purchase.
This clause protects Stretch Zone, allowing them to liquidate collateral quickly and efficiently in case of franchisee default. However, it also carries risks for the franchisee, who may not have the opportunity to ensure the collateral is sold for the highest possible value. The franchisee also waives any rights regarding the marshalling of assets, meaning Stretch Zone can sell the collateral in any order they choose.
Prospective franchisees should be aware of these conditions, as they significantly impact their rights and potential losses in the event of business failure and collateral seizure. It is advisable to seek legal counsel to fully understand the implications of these clauses and negotiate for more favorable terms if possible.