What happens if an Aplus franchisee defaults on any agreement with the Franchisor or its Affiliates?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
- 9.6. Cross-Default.
Any default under any agreement between you and Franchisor or its Affiliates, which your failure to cure within any applicable cure period, shall be considered a default under this Agreement and shall provide an independent basis for termination of this Agreement.
- 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, a default under any agreement with Aplus or its affiliates that is not cured within the applicable cure period will be considered a default under the Development Agreement. This provides an independent basis for Aplus to terminate the Development Agreement.
In the event of a default, Aplus has the option to reduce the number of stores the franchisee is allowed to establish under the Development Schedule. However, even if Aplus exercises this option, the franchisee is still obligated to continue developing stores according to the modified agreement. It is important to note that Aplus's decision to reduce the number of stores does not prevent them from terminating the agreement later if another default occurs.
Furthermore, for two years following a default that leads to the early termination of the Development Agreement, the franchisee and any affiliates are restricted from engaging in any Competitive Business. This includes owning, maintaining, advising, operating, or being employed by a competitive business within the former Development Area or within a 25-mile radius of any existing or developing Aplus store. However, this restriction does not apply to any Competitive Business already owned by the franchisee or its affiliate at the time of the early termination due to default.