How many written notices of default can Aplus deliver to a franchisee within a 12-month period before triggering termination without opportunity to cure, even if the defaults are cured?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisor has the right to terminate this Agreement, which termination will become effective upon delivery of notice without opportunity to cure if: (a) you fail to meet the Development Schedule; (b) you or any Owner is convicted of, or pleads no contest to, a felony, a crime involving moral turpitude, or any other crime or offense that Franchisor believes is reasonably likely to have an adverse effect on the System; (c) there is any transfer or attempted transfer in violation of Article 8 of this Agreement; (d) you or any Owner fails to comply with the confidentiality or non-compete covenants in Article 6 and Article 10 of this Agreement; (e) you or any Owner has made any material misrepresentations in connection with your developer application; (f) Franchisor delivers to you two or more written notices of default pursuant to this Article 9 within any rolling 12-month period, whether or not the defaults described in such notices ultimately are cured; or and (g) violate the non-disparagement requirements pursuant to Section 5.3. above.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, Aplus can terminate the franchise agreement without an opportunity to cure if they deliver two or more written notices of default to the franchisee within any rolling 12-month period. This applies regardless of whether the franchisee ultimately cures the defaults described in the notices.
This provision means that even if an Aplus franchisee corrects the issues that led to the default notices, Aplus still has grounds to terminate the agreement if the franchisee receives two such notices within a year. This could create a challenging situation for franchisees, as even minor or quickly resolved issues could contribute to a termination scenario if they occur repeatedly.
This type of clause is not uncommon in franchise agreements, as franchisors often want to maintain brand standards and protect their system from franchisees who repeatedly violate the agreement, even if they eventually correct the issues. However, it's crucial for prospective Aplus franchisees to understand this provision and ensure they have strong operational and compliance practices to avoid receiving multiple default notices.
It would be prudent for a potential Aplus franchisee to discuss with existing franchisees how this policy is implemented in practice and under what circumstances Aplus typically issues default notices. Understanding the franchisor's approach can help a new franchisee mitigate the risk of unintentional termination due to multiple minor infractions.