If the manufacturer becomes insolvent, can a 7 Brew franchisee terminate the Manufacturing Agreement?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in franchise or other agreement | Summary |
|---|---|---|
| c. Requirements for franchisee | 17 of Franchise | You (i) timely request and conduct a business |
| to renew or extend | Agreement | |
| review, (ii) formally notify us of your desire | ||
| to acquire a successor franchise at least 3 | ||
| months before the end of the franchise term, | ||
| (iii) substantially complied with contractual | ||
| obligations and operated Store in substantial | ||
| compliance with Brand Standards, (iv) | ||
| continue complying substantially with | ||
| contractual obligations between time you | ||
| notify us of your desire to acquire a successor | ||
| franchise and the end of the franchise term, | ||
| (v) remodel/upgrade Store, (vi) sign our then- | ||
| current form of franchise agreement and | ||
| releases (if applicable state law allows), and | ||
| (vii) pay $10,000 successor-franchise fee. | ||
| Terms of new franchise agreement that you | ||
| sign for successor franchise may differ | ||
| materially from any and all terms contained in | ||
| your original expiring Franchise Agreement | ||
| (including higher fees), provided that we will | ||
| modify the new franchise agreement to | ||
| include any specifically-negotiated provisions | ||
| to which we agreed with you before you | ||
| signed the Franchise Agreement that is | ||
| expiring, and you will retain the same defined | ||
| Area of Protection. | ||
| d. Termination by franchisee | 18.A of Franchise | If we breach Franchise Agreement and do not |
| Agreement | ||
| 4(a) of Manufacturing | ||
| Agreement | ||
| cure default within applicable cure period | ||
| after notice from you, or if your Store does | ||
| not reach a certain EBITDA level; otherwise, | ||
| you may not terminate without cause, subject | ||
| to state law. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 54–61)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, a franchisee has the right to terminate the Manufacturing Agreement if the manufacturer becomes insolvent. The FDD outlines specific conditions under which a franchisee can terminate this agreement.
Specifically, the franchisee can terminate the Manufacturing Agreement if the manufacturer fails to perform their obligations and does not correct the failure within 30 days after receiving notice from the franchisee. Additionally, the franchisee can terminate the agreement if the manufacturer becomes insolvent or is involved in a bankruptcy-related event.
This provision protects the 7 Brew franchisee in situations where the manufacturer's financial instability or failure to meet obligations could negatively impact the franchisee's business operations. It allows the franchisee to seek alternative manufacturing arrangements to ensure a stable supply chain and maintain business continuity. It is important for prospective franchisees to understand these termination rights and the conditions under which they can be exercised, as they provide a safeguard against potential disruptions caused by the manufacturer's performance or financial status.