What happens to existing Aplus franchise agreements if the Development Agreement is terminated?
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; cross defaults, bankruptcy, foreclosure, insolvency, conviction of a felony, misrepresentations in your application, and/or repeated defaults, even if cured. |
| i. | Developer's obligation on termination/non-renewal | Sections 2.2 and 10.2 | You will have no further right to develop or operate additional APLUS Stores which are not, at the time of termination, the subject of a then existing franchise agreement between you and us. You may continue to own and operate all APLUS Stores under then existing Franchise Agreements. |
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, termination of the Development Agreement does not necessarily impact existing Aplus franchise agreements. The FDD states that if the Development Agreement is terminated, the developer will no longer have the right to develop or operate additional Aplus stores that are not already subject to a franchise agreement. However, the developer may continue to own and operate Aplus stores under then-existing Franchise Agreements.
This means that if a developer has already opened Aplus stores under individual franchise agreements before the Development Agreement is terminated, those franchise agreements remain in effect. The developer can continue to operate those stores according to the terms of the franchise agreements. The termination of the Development Agreement only restricts the developer from opening new Aplus locations beyond those already franchised.
This provision protects the franchisee's investment in already-established Aplus locations. Even if the developer fails to meet their development schedule or otherwise breaches the Development Agreement, their existing Aplus stores can continue to operate under their respective franchise agreements. This provides a degree of security and stability for franchisees who have already invested time and resources into building their Aplus businesses.