If a tenant defaults, does the landlord have an obligation to notify 1 800 Packouts?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
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EXHIBIT B
TO THE NONDISCLOSURE AND NONCOMPETE AGREEMENT
YOUR TERRITORY
"Your Territory" is:
STANDARD LEASE RIDER
| EXHIBIT B | 2024 | 2023 | ||
|---|---|---|---|---|
| Royalties | $16,760,701 | $13,797,504 | ||
| Advertising services | 8,154,242 | 7,184,067 | ||
| Other revenues | 6,665,981 | 5,113,894 | ||
| Franchise fees | 5,798,078 | 5,023,575 | ||
| Equipment and product sales | 3,878,525 | 2,414,926 | ||
| Call center services | 3,018,653 | 2,799,481 | ||
| Vendor rebates | 2,782,697 | 1,785,775 | ||
| Installation sales | 434,495 $47,493,372 | $38,119,222 | - | #### THE PARTIES HEREBY AGREE: |
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- PACKOUTS' NOTICE AND CURE RIGHTS Concurrently with giving any Notice of Default to Tenant, Landlord also agrees to send a copy of such Notice to PACKOUTS. In the event Tenant fails to cure any default within the time required in the Lease, Landlord shall promptly give written notice to PACKOUTS specifying the nature of Tenant's defaults and granting PACKOUTS an additional thirty (30) days from the date PACKOUTS receives such notice to exercise its right, in PACKOUTS's sole discretion, to either (a) accept an assignment of the Lease upon the same terms (including all renewals) as apply to this Rider; or (b) assign the Lease to an authorized franchisee of PACKOUTS (provided that such franchisee shall be required to execute any such documentation as required by Landlord).
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- ASSIGNMENT OF LEASE Notwithstanding anything in the Lease to the contrary, Landlord agrees that the Lease and the right, title and interest (including all renewal rights) of the Tenant and any subsequent or successor Tenant thereunder, may be assigned to PACKOUTS or its parents, subsidiaries or affiliates (PACKOUTS, its parents, subsidiaries or affiliates are collectively referred to as "PACKOUTS Entities"), or to an authorized franchisee of PACKOUTS (provided that such franchisee shall be required to execute any such documentation as required by the Landlord).
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to the 2025 FDD, the landlord does have an obligation to notify 1 800 Packouts if the tenant defaults. Specifically, the landlord must send 1 800 Packouts a copy of any default notice sent to the tenant. This ensures that 1 800 Packouts is informed of any issues that could jeopardize the franchisee's lease. This obligation is part of a broader agreement outlined in the Rider to Lease. This agreement ensures 1 800 Packouts has the opportunity to address the default and protect its interests.
Furthermore, if the tenant fails to resolve the default within the lease's specified timeframe, the landlord must provide 1 800 Packouts with written notice detailing the nature of the defaults. Upon receiving this notice, 1 800 Packouts is granted an additional 30 days to exercise its right to either accept an assignment of the lease or assign the lease to another authorized 1 800 Packouts franchisee. This provision allows 1 800 Packouts to maintain a presence at the location even if the original franchisee is unable to continue operations.
This arrangement benefits 1 800 Packouts by giving it control over the location and preventing potential vacancies that could harm the brand's reputation. It also protects the landlord by ensuring the property remains occupied by a 1 800 Packouts business, maintaining rental income. However, the tenant remains liable to the landlord for all obligations under the lease, even if the lease is assigned to 1 800 Packouts or another franchisee, unless 1 800 Packouts expressly assumes the obligations of the tenant in writing.
For a prospective 1 800 Packouts franchisee, this clause offers a degree of security. If they face difficulties and default on their lease, 1 800 Packouts has the option to step in and take over the lease, potentially preventing the business from closing. This can be a valuable safety net, especially for new franchisees who may encounter unexpected challenges. Franchisees should carefully review the terms of the Rider to Lease and understand their rights and obligations in the event of a default.