What happens if I am in default of the Development Agreement for Aplus?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
- 9.7. Additional Remedies.
If you are in Default of this Agreement, Franchisor may, in its sole discretion, elect to reduce the number of Stores which you may establish pursuant to the Development Schedule.
If Franchisor elects to exercise this remedy as set forth above, you agree to continue to develop Stores in accordance with your rights and obligations under this Agreement, as modified.
Franchisor's exercise of its remedy under this Section 9.7 shall not constitute a waiver by Franchisor to exercise Franchisor's option to terminate this Agreement at any time with respect to a subsequent event of default of a similar or different nature
10. COVENANTS
10.1. Non-Competition After Expiration or Termination of Agreement. For a two-year period following a default that has led to early termination of this Agreement, you and any Affiliate shall not either directly or indirectly, for yourselves, or through, on behalf of, or in conjunction with any person, persons, or legal entity, own, maintain, advise, operate, engage in, be employed by, perform services for, consult with, or have any interest in, a relationship, or associate with any Competitive Business, and (a) is, or is intended to
be, located within the former Development Area; or (b) within a 25-mile radius of any APLUS Store in existence or under development at the time of such termination. Any Competitive Business that is already owned by you or your Affiliate at the time of early termination due to default is excepted from this Section 10.1. The obligations described in this Section 10.1 shall be tolled during any period of noncompliance and shall exclude any Competitive Business already open for business to the public at the time of expiration or termination of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, if a developer defaults on the Development Agreement, Aplus has the option to reduce the number of stores the developer is allowed to establish under the Development Schedule. However, the developer must continue to develop stores according to their rights and obligations, even with the reduced number of stores.
Notably, Aplus's choice to reduce the number of stores does not prevent them from terminating the Development Agreement later for a similar or different default event. This means Aplus retains the right to terminate the agreement for any subsequent default, even after initially choosing to reduce the store count.
Furthermore, for two years after the Development Agreement's early termination due to default, the developer and any affiliates are restricted from involvement with any Competitive Business. This restriction applies to businesses located within the former Development Area or within a 25-mile radius of any existing or developing Aplus store at the time of termination. However, this non-compete clause does not apply to any Competitive Business already owned by the developer or their affiliate at the time of the early termination due to default or any Competitive Business already open to the public at the time of the Development Agreement's expiration or termination.