Under what circumstances can the Aplus franchisor terminate the Development Agreement with cause?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
HIP FRANCHISE AGREEMENT AND RELATED AGREEMENTS**
| Provision | Section in | Summary | |
|---|---|---|---|
| Development 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 | No provision | Not applicable. | |
| term | |||
| c. Requirements for Developer | No provision | Not applicable | |
| to renew or extend | |||
| d. Termination by Developer | No provision | Not applicable | |
| e. Termination by the | No provision | Not applicable | |
| franchisor without cause | |||
| 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. |
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, the franchisor can terminate the Development Agreement with cause under several circumstances, which are categorized as either curable or non-curable defaults.
Curable defaults, which Aplus gives the developer a period to correct, include failure to pay fees (10 days to cure) and any other default, including breaches of obligations under any franchise agreement or other agreement with Aplus (30 days to cure).
Non-curable defaults, which allow Aplus to terminate the agreement immediately, include unapproved transfers, failure to meet development obligations, breaches of confidentiality or unfair competition, cross-defaults, bankruptcy, foreclosure, insolvency, conviction of a felony, misrepresentations in the application, and repeated defaults (even if previously cured). Furthermore, the death or permanent incapacity of an owner can lead to termination if the applicable transfer requirements are not met. These termination conditions are detailed in Sections 9.1, 9.2, 9.3, 9.4, 9.5, and 9.6 of the Development Agreement.
These provisions are important for a prospective Aplus developer to understand, as they outline the conditions under which their development rights can be terminated. Understanding both the curable and non-curable defaults can help a developer avoid actions that could lead to termination and protect their investment. The prospective franchisee should carefully review these sections of the Development Agreement to fully understand their obligations and the potential consequences of failing to meet them.