What is considered an 'Adverse Change of Law' for a 360 Painting franchise?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
- 19.4 Adverse Change of Law. Franchisor and Franchisee acknowledge that the franchise rights contemplated under this Agreement are granted on the assumption that there will be no adoption, promulgation, modification or reinterpretation by any governmental authority of any applicable law, regulation, policy, order, circular or similar directive which action materially and adversely affects Franchisor's or Franchisee's ability to enjoy the economic benefits of this Agreement, or to enforce its rights hereunder or thereunder (an "Adverse Change of Law", which does not constitute an Event of Force Majeure)during the term of this Agreement. If, at any time during the term of this Agreement, there occurs an Adverse Change of Law, the parties agree to use their best efforts and to cooperate with each other in good faith to amend this Agreement either to bring it into conformity with the requirements of the Adverse Change of Law or to seek an alternative way to comply with the Adverse Change of Law which allows both parties to continue to enjoy the economic benefits of this Agreement. If, in Franchisor's or Franchisee's judgment, this Agreement cannot be modified to comply with the Adverse Change of Law without undermining material elements of the franchise relationship or the enjoyment of the economic benefits thereunder, Franchisor or Franchisee (as applicable) may, at its option, without liability for such action or any further obligation to the other, terminate this Agreement and the territorial rights granted hereby upon 90 days' written notice to Franchisor or Franchisee (as applicable); provided that Franchisee shall be required to comply with all post-termination obligations set forth in this Agreement as a continuing condition to any such termination.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to the 2025 FDD, an 'Adverse Change of Law' for a 360 Painting franchise refers to any action by a governmental authority that involves adopting, creating, changing, or reinterpreting any applicable law, regulation, policy, order, circular, or similar directive. This change must materially and negatively impact either 360 Painting's or the franchisee's ability to benefit economically from the Franchise Agreement or to enforce their rights under it.
If such an 'Adverse Change of Law' occurs during the term of the agreement, both 360 Painting and the franchisee are obligated to work together in good faith to amend the agreement. The goal is to either bring it into compliance with the new legal requirements or find an alternative way to comply that still allows both parties to benefit economically from the agreement.
However, if either 360 Painting or the franchisee believes that the agreement cannot be modified to comply with the 'Adverse Change of Law' without significantly undermining the franchise relationship or the economic benefits, either party has the option to terminate the agreement. This termination can occur without liability or further obligation to the other party, provided that a 90-day written notice is given. The franchisee must still fulfill all post-termination obligations outlined in the agreement as a condition of such termination.