What are some examples of non-curable defaults that could lead to termination of the Aplus Development Agreement?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Development | Summary | |
|---|---|---|---|
| Agreement | |||
| a. | Length of the Agreement term | Section 2.1 | The period beginning on the effective date and ending on the earlier of: (i) the date on which you have completed your development obligations, or (ii) 12:00 midnight CST on the last day specified in the development schedule. |
| b. | Renewal or extension of the term | No provision | Not applicable. |
| c. | Requirements for Developer to renew or extend | No provision | Not applicable |
| d. | Termination by Developer | No provision | Not applicable |
| e. | Termination by the franchisor without cause | No provision | Not applicable |
| f. | Termination by the franchisor with "cause" | Sections 9.1, 9.2., 9.3, 9.4, 9.5, and 9.6 | We can terminate if you materially default under your development agreement, an individual franchise agreement, or any other agreement between you or your affiliate and us. In the event of the death or permanent incapacity of an owner, we may terminate if you fail to adhere to the applicable transfer requirements. |
| g. | "Cause" defined - curable defaults | Sections 9.3, 9.4, 9.5, and 9.6 | You have 10 days to cure a failure to pay fees and 30 days to cure any other default, and in the case of a breach or default in the performance of your obligations under any franchise agreement or other agreement between you and us. |
| h. | "Cause" defined – non curable defaults | Sections 9.1 and 9.2 | Non-curable defaults: unapproved transfers; failure to meet development obligation; any breach of confidentiality or unfair competition described in Section 10; |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 53–64)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, certain defaults under the Development Agreement cannot be cured and may lead to termination. These non-curable defaults include unapproved transfers of the agreement or ownership, failure to meet the development obligations outlined in the agreement, and any breach of confidentiality or engaging in unfair competition as described in Section 10 of the agreement.
Additionally, Aplus considers cross defaults (where a default occurs under another agreement with Aplus or its affiliates), bankruptcy, foreclosure, insolvency, or conviction of a felony as non-curable defaults. Misrepresentations made in the franchise application and repeated defaults, even if they were previously cured, are also grounds for immediate termination.
These stipulations are important for potential Aplus developers to understand, as they highlight situations where the agreement can be terminated without an opportunity to correct the issue. Prospective franchisees should carefully review Sections 9.1, 9.2, and 10 of the Development Agreement to fully understand the implications of these non-curable defaults and how to avoid them. Understanding these terms is crucial for maintaining a good standing with Aplus and ensuring the longevity of the franchise agreement.