Under what conditions does 7 Brew have the right to terminate a franchise agreement?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
without cause. |
| Provision | Section in franchise or other agreement | Summary | |---|---|---| | f. Termination by franchisor with cause | 18.B of Franchise Agreement and 8 of DRR 4(b) of Manufacturing Agreement | We have the right to terminate your Franchise | | | | Agreement (and development rights) only if | | | | you or your owners commit one of several | | | | violations. | | | | While termination of the DRR does not | | | | impact any then-effective franchise | | | | agreements, termination of a franchise | | | | agreement entitles us to terminate the DRR. | | | | Manufacturer has the right to terminate the | | | | Manufacturing Agreement for cause. | | g. “Cause” defined curable defaults | 18.B of Franchise Agreement and 8 of DRR 4(b) of Manufacturing Agreement | You have 5 days to cure Gross Sales | | | | reporting, payment (to us), and insurance | | | | defaults and defaults under any note, lease, or | | | | agreement relating to Store’s operation or | | | | ownership; 10 days to satisfy unpaid | | | | judgments of at least $25,000; 30 days to pay | | | | suppliers and to cure other defaults not listed | | | | in (h) below; and 60 days to vacate | | | | attachment, seizure, or levy of Storeor | | | | appointment of receiver, trustee, or liquidator. | | | | | | | | You must immediately begin correcting | | | | violations of material law and correct them | | | | within time the law specifies. | | | | | | | | If the Store is damaged to such an extent that | | | | you cannot operate at existing location, you | | | | must relocate the Store to a substitute site we | | | | accept and begin operating the Store at that | | | | substitute site within 12 months from the first | | | | date on which you could not operate the Store | | | | at its existing location. | | | | | | | | We have the right to terminate DRR if you do | | | | not meet development schedule and do not | | | | cure failure within 90 days after receiving | | | | notice from us. | | | | | | | | While termination of the DRR does not | | | | impact any then-effective franchise | | | | agreements, termination of a franchise | | | | agreement entitles us to terminate the DRR. | | | | | | | | Manufacturer has the right to terminate the | | | | Manufacturing Agreement if you fail to pay | | | | required purchase price and to cure the failure |
| Provision | Section in franchise or other agreement | Summary | |---|---|---| | | | within 10 days after notice, if you commit | | | | another default under the Manufacturing | | | | Agreement and fail to cure that default within | | | | 30 days after notice, or if you are involved in | | | | a bankruptcy-related event that is not | | | | dismissed within 60 days, | | h. “Cause” defined non- | 18.B of Franchise | Non-curable defaults include: material | | curable defaults | Agreement and 8 of DRR | | | | | misrepresentation or omission; failure to | | | | develop and open Store (with fully-trained | | | | staff) by deadline; abandonment or failure to | | | | operate for more than 7 consecutive days; | | | | unapproved transfer; felony conviction or | | | | guilty plea; dishonest, unethical, or immoral | | | | conduct adversely impacting our Marks; | | | | foreclosure on Store’s assets; misuse of | | | | confidential information; violation of non- | | | | compete; material underreporting of Gross | | | | Sales; disabling Store’s computer system; | | | | closing bank account from which we debit | | | | funds without first setting up new account; | | | | failure to pay taxes due; repeated defaults; | | | | assignment for benefit of creditors or | | | | admission of inability to pay debts when due; | | | | violation of anti-terrorism laws; or causing or | | | | contributing to a data security incident or | | | | failure to comply with requirements to protect | | | | Consumer Data. | | | | | | | | We have the right to terminate DRR if you do | | | | not meet contractual obligations (other than | | | | development obligations); if Franchise | | | | Agreement or another franchise agreement | | | | between us and you (or your affiliated entity) | | | | is terminated by us for cause or by you | | | | without cause; or if we deliver formal written | | | | notice of default to you (or your affiliated | | | | entity) under Franchise Agreement or another | | | | franchise agreement between us and you (or | | | | your affiliated entity) and that default is not | | | | cured within required timeframe. | | | | | | | | However, termination of the DRR does not | | | | impact any then-effective franchise | | | | agreement. |
| Provision | Section in franchise or other agreement | Summary |
|---|---|---|
| i. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 54–61)
What This Means (2025 FDD)
According to the 2025 7 Brew Franchise Disclosure Document, 7 Brew has the right to terminate a Franchise Agreement if the franchisee or their owners commit certain violations, as detailed in Section 18.B of the Franchise Agreement and Section 8 of the DRR, as well as 4(b) of the Manufacturing Agreement. These violations fall into two categories: curable defaults and non-curable defaults.
Curable defaults, which allow the franchisee an opportunity to correct the issue, include failures in Gross Sales reporting, payments to 7 Brew, and insurance lapses, with a 5-day cure period. Defaults under any note, lease, or agreement relating to the Store’s operation or ownership also fall under this category. Franchisees have 10 days to satisfy unpaid judgments of at least $25,000, 30 days to pay suppliers and cure other defaults not listed as non-curable, and 60 days to vacate any attachment, seizure, or levy of the Store, or appointment of a receiver, trustee, or liquidator. Additionally, franchisees must immediately begin correcting violations of material law and complete the correction within the time specified by law. If the store is damaged to the point of inoperability, the franchisee has 12 months to relocate and begin operating at a substitute site approved by 7 Brew. Failure to meet the development schedule under the DRR also constitutes a curable default, with a 90-day cure period after notice from 7 Brew. The manufacturer also has the right to terminate the Manufacturing Agreement if the franchisee fails to pay the required purchase price and to cure the failure within 10 days after notice, if the franchisee commits another default under the Manufacturing Agreement and fails to cure that default within 30 days after notice, or if the franchisee is involved in a bankruptcy-related event that is not dismissed within 60 days.
Non-curable defaults, which allow 7 Brew to terminate the agreement immediately, include material misrepresentation or omission, failure to develop and open the Store by the deadline, abandonment or failure to operate for more than 7 consecutive days, unapproved transfer of the franchise, felony conviction or guilty plea, dishonest, unethical, or immoral conduct adversely impacting 7 Brew's Marks, foreclosure on the Store’s assets, misuse of confidential information, violation of non-compete agreements, material underreporting of Gross Sales, disabling the Store’s computer system, closing the bank account from which 7 Brew debits funds without setting up a new account, failure to pay taxes due, repeated defaults, assignment for the benefit of creditors or admission of inability to pay debts when due, violation of anti-terrorism laws, or causing or contributing to a data security incident or failure to comply with requirements to protect Consumer Data. 7 Brew also has the right to terminate the DRR if the franchisee does not meet contractual obligations (other than development obligations); if the Franchise Agreement or another franchise agreement between 7 Brew and the franchisee (or their affiliated entity) is terminated for cause by 7 Brew or without cause by the franchisee; or if 7 Brew delivers formal written notice of default and that default is not cured within the required timeframe.
It is important to note that while termination of the DRR does not impact any then-effective franchise agreements, termination of a franchise agreement entitles 7 Brew to terminate the DRR. Prospective franchisees should carefully review Section 18 of the Franchise Agreement and Section 8 of the DRR, as well as 4(b) of the Manufacturing Agreement, to fully understand the circumstances under which 7 Brew may terminate the agreement and the potential consequences of such termination.