Is knowingly understating sales by an Amorino franchisee grounds for termination?
Amorino Franchise · 2025 FDDAnswer from 2025 FDD Document
-----------------| | franchisor | applicable. | | | without cause | | | | Termina | Section 16 of | We can terminate the franchise agreement if you commit any | | f. | | | | tion by | the franchise | one of a list of violations set forth in the franchise agreement, or | | franchisor with | agreement | if you default under any other agreement between you and | | cause | | either us or any of our affiliates. If you are in breach of any agreement with us or any of our affiliates, we have the right to suspend any obligations by us or our affiliates, including providing products or services, until the breach is cured. Some violations are capable of being cured and some cannot be cured. We can also terminate if an approved transfer is not completed within a certain period of time following your death or permanent incapacity. | | "Cause" | Section 16.B | We may terminate for any default, other than a default for the | | g. | | | | defined - | of the | reasons listed in Section 16.A, that is capable of being cured | | curable defaults | franchise | and the default has not been cured within 20 days of notice of | | | agreement | default. | | "Cause" | Section 16.A | We may terminate by giving you notice of termination upon | | h. | | | | defined – | of the | certain event, without any opportunity to cure: Your failure to | | non | | | | curable defaults | franchise | make any payment due under the franchise agreement within | | | agreement | 30 days of its due date; insolvency; voluntary bankruptcy; involuntary bankruptcy not dismissed within 30 days; general assignment for creditors, receivership, dissolution of your business entity; if execution is levied your business or property; foreclosure, levy and sale of assets of franchised business; failure to acquire a site by the site selection date; failure to complete initial training by opening date; failure to open Store by opening date; abandonment of the franchised business; loss of necessary permits and approvals to operate the franchised business; loss of right to occupy the Store premises; conviction of a felony or certain other crimes; unapproved transfers; repeated defaults, even if cured; misrepresentations in franchise application; knowingly understating your sales; knowingly maintaining false books or records; failure to make any payment when due to Amorino or any of its affiliates or approved suppliers, offering for sale or selling unauthorized products or services; violation of confidentiality and non-competition covenants;
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 55–67)
What This Means (2025 FDD)
According to Amorino's 2025 Franchise Disclosure Document, knowingly understating sales is indeed grounds for termination of the franchise agreement. Specifically, Amorino can terminate the franchise agreement without providing an opportunity to cure this violation. This means that if Amorino discovers that a franchisee is intentionally reporting lower sales figures than actual, they have the right to immediately terminate the agreement.
This provision protects Amorino from financial misreporting and ensures that franchisees are honest in their dealings with the company. Underreporting sales can affect royalty payments, which are typically calculated as a percentage of gross sales. By including this clause, Amorino aims to maintain the integrity of its financial reporting and protect its revenue streams.
For a prospective Amorino franchisee, this highlights the importance of maintaining accurate and transparent financial records. It is crucial to understand that any attempt to manipulate sales figures, even if it seems minor, can have severe consequences, including the loss of the franchise. Franchisees should ensure they have robust accounting practices in place and fully comply with all reporting requirements outlined in the franchise agreement.
This type of clause is relatively common in franchise agreements across various industries, as franchisors need to protect their brand and revenue. Franchisees should be aware of all termination clauses and ensure they fully understand their obligations to avoid any actions that could lead to termination.