Does a separate sale of collateral by Stretch Zone preclude later sales of the collateral?

According to Stretch Zone's 2025 Franchise Disclosure Document, a separate sale of collateral does not prevent later sales of the same collateral. The document specifies that Stretch Zone, as the Franchisor/Secured Party, has the option to offer the collateral for sale separately at different times and/or locations. This means that if Stretch Zone sells a portion of the collateral, it is not barred from selling the remaining collateral at a later date.

This provision provides Stretch Zone with flexibility in how it recovers its losses in case of franchisee default. Rather than being forced to sell all collateral at once, which might result in lower prices, Stretch Zone can strategically sell assets over time to maximize the recovery amount. This approach could potentially benefit both Stretch Zone and the franchisee, as it aims to minimize the deficiency the franchisee might owe after the collateral is sold.

For a prospective franchisee, this clause highlights the importance of understanding the terms of the security agreement and the potential consequences of default. It is crucial to be aware that Stretch Zone has significant latitude in how it disposes of the collateral and that a franchisee could face further sales of collateral even after an initial sale. Franchisees should seek legal counsel to fully understand their rights and obligations under the agreement.

It is also important to note that while Stretch Zone has the right to sell collateral separately, it must still act in a commercially reasonable manner. However, the FDD indicates that Stretch Zone may sell on terms as it chooses, without assuming any credit risk and without any obligation to advertise or give notice of any kind, which could impact the proceeds received from the sale of the collateral.