In Hawaii, can Annex Brands deduct reasonable costs from compensation paid to a franchisee for removing and transporting items after termination or non-renewal?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
- (2) Item 17 of this disclosure document is modified to include the following paragraph under the Summary column of part (i):
- Under Hawaii law, on termination or refusal to renew the franchise, you are entitled to be compensated for the fair market value, at the time of the termination or expiration of the franchise, of our inventory, supplies, equipment and furnishings purchased from us or a supplier approved or designated by us; provided that personalized materials which have no value to us need not be compensated for. If we refuse to renew the franchise for the purpose of converting your retail center to one owned and operated by us, we, in addition to the remedies described above, are required to compensate you for the loss of goodwill. We may deduct from such compensation reasonable costs incurred in removing, transporting and
disposing of your inventory, supplies, equipment and furnishings, and may offset from such compensation any moneys due us.
Source: Item 23 — Receipts (FDD pages 110–299)
What This Means (2025 FDD)
According to Annex Brands's 2025 Franchise Disclosure Document, Hawaii law stipulates certain compensation rights to franchisees upon termination or non-renewal of their franchise agreement. Specifically, franchisees are entitled to the fair market value of inventory, supplies, equipment, and furnishings purchased from Annex Brands or its approved suppliers at the time of termination or expiration. However, this excludes personalized materials that hold no value for Annex Brands. Furthermore, if Annex Brands refuses to renew the franchise to convert it to a company-owned operation, the franchisee is entitled to compensation for the loss of goodwill, in addition to the aforementioned remedies.
The FDD outlines that Annex Brands is permitted to deduct reasonable costs from the compensation paid to the franchisee. These costs can include expenses incurred in removing, transporting, and disposing of the franchisee's inventory, supplies, equipment, and furnishings. Additionally, Annex Brands can offset from the compensation any outstanding monies owed to them by the franchisee.
This provision means that a franchisee in Hawaii should be aware that the final compensation received upon termination or non-renewal may be reduced by these costs and any outstanding debts. It is important for prospective franchisees to understand these potential deductions and to maintain accurate records of purchases and payments to ensure fair compensation in the event of termination or non-renewal. Franchisees should seek clarification from Annex Brands regarding what constitutes 'reasonable costs' for removal, transportation, and disposal to avoid potential disputes.