Must All Team demonstrate a material and adverse effect on the franchise to terminate for felony conviction or fraudulent activity?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding anything contained herein to the contrary, if state law permits, ATFC shall be permitted to terminate the franchise immediately and without notice when the basis or grounds for cancellation is: (a) conviction of a felony or any other criminal misconduct which, in ATFC's opinion materially and adversely affects the operation, maintenance, reputation, or goodwill of the franchise; (b) fraudulent activity which, in ATFC's opinion, materially and adversely affects the operation, maintenance, reputation, or goodwill of the franchise; (c) abandonment of the franchise; (d) bankruptcy or insolvency of the FRANCHISEE; (e) the termination of any other agreement between FRANCHISEE and ATFC or its affiliates; (f) repeated failure or refusal to comply with the lawful provisions of this Agreement, (i.e., three (3) or more times in any twelve (12) month period) whether or not such failures or refusals are corrected after notice; or (g) any other act or omission which permits termination without notice and/or an opportunity to cure under applicable state law.
Source: Item 22 — CONTRACTS (FDD pages 33–34)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, All Team can terminate the franchise agreement immediately and without notice if the franchisee is convicted of a felony or engages in fraudulent activity. However, All Team must demonstrate that the felony or fraudulent activity materially and adversely affects the operation, maintenance, reputation, or goodwill of the franchise.
This means that while All Team has the right to terminate the agreement in such cases, they must provide evidence that the franchisee's actions have a significant negative impact on the franchise. This protects the franchisee from termination based on minor offenses or actions that do not harm the business.
This requirement ensures that All Team's termination decisions are based on legitimate business concerns and not on arbitrary or discriminatory grounds. It also provides a degree of security for franchisees, as they can only be terminated for felony convictions or fraudulent activities that demonstrably harm the franchise.