What happens if an Alloy developer is in default of the Development Agreement?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
DEFAULT AND TERMINATION
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- The following provisions apply with respect to default and termination:
- A. The rights and territorial protection granted to you in this Agreement have been granted in reliance on your representations and warranties, and strictly on the conditions set forth in Sections 2, 4 and 6 of this Agreement, including the condition that you comply strictly with the Development Schedule.
- B. You will be deemed in default under this Agreement if you breach any of the terms of this Agreement, including the failure to meet the Development Schedule, or the terms of any Franchise Agreement or any other agreement between you or your affiliates and us or our affiliates. All rights granted in this Agreement immediately terminate upon written notice without opportunity to cure if: (i) you become insolvent, commit any affirmative action of insolvency or file any action or petition of insolvency, (ii) a receiver (permanent or temporary) of your property is appointed by a court of competent authority, (iii) you make a general assignment or other similar arrangement
for the benefit of your creditors, (iv) a final judgment remains unsatisfied of record for 30 days or longer (unless supersedeas bond is filed), (v) execution is levied against your business or property, (vi) suit to foreclose any lien or mortgage against the premises or equipment is instituted against you and not dismissed within 30 days, or is not in the process of being dismissed, (vii) you fail to meet the development obligations set forth in the Development Schedule attached as Appendix B (unless we determine that you are on track to become compliant with the Development Schedule within 30 days following the applicable deadline set forth in the Development Schedule), (viii) you fail to comply with any other provision of this Agreement and do not correct the failure within 30 days after written notice of that failure is delivered to you, or (ix) we have delivered to you a notice of termination of a Franchise Agreement or another agreement between you or your affiliates and us or our affiliates in accordance with the terms and conditions of such Franchise Agreement or other agreement.
C. If you fail to comply with the Development Schedule, we may terminate this Agreement, reduce the number of Facilities you have the right to develop hereunder, terminate or reduce the Development Territory, repurchase any Facilities open by you under this Agreement or exercise any other rights and remedies that we may have under the law.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, a developer can be deemed in default of the Development Agreement for several reasons. These include breaching any terms of the Development Agreement, failing to meet the Development Schedule, or breaching any terms of any Franchise Agreement or other agreement between the developer or its affiliates and Alloy or its affiliates. If any of these defaults occur, all rights granted in the Development Agreement immediately terminate upon written notice, without an opportunity to cure the default in certain situations.
Specifically, immediate termination without opportunity to cure occurs if the developer: becomes insolvent, takes any action of insolvency, or files any action or petition of insolvency; has a receiver appointed for their property; makes a general assignment for the benefit of creditors; has an unsatisfied final judgment for 30 days or longer; has an execution levied against their business or property; faces a suit to foreclose any lien or mortgage against the premises or equipment that is not dismissed within 30 days; fails to meet the development obligations set forth in the Development Schedule (unless Alloy determines the developer is on track to become compliant within 30 days); fails to comply with any other provision of the agreement and does not correct the failure within 30 days after written notice; or receives a notice of termination of a Franchise Agreement or another agreement between the developer or its affiliates and Alloy or its affiliates.
If the developer fails to comply with the Development Schedule, Alloy has further rights. Alloy may terminate the Development Agreement, reduce the number of Alloy facilities the developer has the right to develop, terminate or reduce the Development Territory, repurchase any Alloy facilities opened by the developer under the agreement, or exercise any other rights and remedies available under the law. Upon termination or expiration of the Development Agreement, all rights granted to the developer automatically terminate, and all remaining rights to develop Alloy facilities are revoked and become null and void. The developer is not entitled to any refund of fees and has no right to develop or operate any business for which a Franchise Agreement has not been executed. Alloy is then entitled to develop and operate, or franchise others to develop and operate, Alloy facilities in the Development Territory.
Furthermore, the developer must immediately cease operating their business under the Development Agreement and must not represent themselves as a present or former Alloy developer, except in connection with the business operations of any existing facilities that have been developed prior to the termination and are still operating under a valid Franchise Agreement. The developer must also take action to cancel or assign to Alloy any assumed name or registration that contains the name Alloy or any other Trademark of Alloy, and assign all rights to telephone numbers to Alloy. The developer must pay all sums owing to Alloy and its affiliates within 30 days of termination or expiration.