What is the effect of cancellation on franchise agreements entered into by Alloy prior to the effective date of cancellation?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
You understand and agree that any and all Franchise Agreements will be construed and will exist independently of this Agreement.
The continued existence of each Franchise Agreement will be determined by the terms and conditions of such Franchise Agreement.
Except as specifically set forth in this Agreement, the establishment and operation of each Facility must be in accordance with the terms of the applicable Franchise Agreement.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the cancellation of the Development Agreement does not necessarily impact pre-existing Franchise Agreements. The FDD states that Franchise Agreements are construed and exist independently of the Development Agreement. The continued existence of each Franchise Agreement is determined by its own terms and conditions, meaning that cancellation of the Development Agreement does not automatically terminate active Franchise Agreements.
Specifically, if a franchisee has developed and is operating Alloy facilities under valid Franchise Agreements before the Development Agreement is terminated, those Franchise Agreements remain in effect. The franchisee can continue to operate those existing facilities according to the terms of their respective Franchise Agreements. However, all remaining rights to develop additional Alloy facilities under the Development Agreement are automatically revoked and become null and void upon termination or expiration of the Development Agreement.
Upon termination or expiration of the Development Agreement, Alloy is entitled to develop and operate, or franchise others to develop and operate, Alloy facilities in the Development Territory, except as may be otherwise provided under any Franchise Agreement that has been executed between Alloy and the franchisee and that has not been terminated. This means that Alloy can grant new franchises in the area, provided it does not conflict with the franchisee's existing, valid Franchise Agreements.
In summary, the cancellation of the Development Agreement primarily affects the franchisee's ability to develop new Alloy locations. Existing Franchise Agreements for already-operational locations remain in force, governed by their own terms, unless those agreements are separately terminated. A prospective franchisee should carefully review the terms of both the Development Agreement and the Franchise Agreement to fully understand their rights and obligations under various termination scenarios.