Does Stretch Zone have the right to record the UCC-1 Financing Statement?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 3.6 SECURITY INTEREST
As security for your payment and performance of all of your obligations to us under this Agreement including all costs, expenses, advances and liabilities that we may incur in connection with this Agreement (the "Secured Obligations"), you grant to us a first priority security interest in the assets used to operate the Franchise Business (the "Secured Assets") under the applicable Uniform Commercial Code in the state in which the Franchise Business is located. You will sign the Security Agreement, and the UCC-1 Financing Statement and Rider included as Exhibit J to the FDD. You acknowledge that we be recording the UCC-1 Financing Statement.
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, Stretch Zone is granted the right to record the UCC-1 Financing Statement. As security for the franchisee's payment and performance of all obligations under the agreement, the franchisee grants Stretch Zone a first priority security interest in the assets used to operate the franchise business.
This security interest covers all costs, expenses, advances, and liabilities that Stretch Zone may incur in connection with the agreement. The franchisee is required to sign a Security Agreement, along with the UCC-1 Financing Statement and Rider, which are included as Exhibit J to the FDD.
This means that Stretch Zone has a legal claim on the franchisee's business assets to ensure that the franchisee meets all financial and operational obligations. The UCC-1 Financing Statement is a public record that notifies other creditors of Stretch Zone's security interest in the franchisee's assets. This is a standard practice in franchising to protect the franchisor's investment and ensure compliance with the franchise agreement.