Under what conditions can Aplus 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. “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; |
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, Aplus can terminate the Development Agreement with cause under several conditions, which are outlined in Sections 9.1, 9.2, 9.3, 9.4, 9.5, and 9.6 of the Development Agreement. Aplus may terminate the agreement if the developer materially defaults under the development agreement itself, an individual franchise agreement, or any other agreement between the developer (or their affiliate) and Aplus. Additionally, in the event of the death or permanent incapacity of an owner, Aplus may terminate the agreement if the developer fails to adhere to the applicable transfer requirements.
The grounds for termination are further divided into curable and non-curable defaults. For curable defaults, the developer has a specific timeframe to rectify the issue. Specifically, the developer has 10 days to cure a failure to pay fees and 30 days to cure any other default, including breaches or defaults in the performance of obligations under any franchise agreement or other agreement with Aplus.
Non-curable defaults, which allow for immediate termination, include unapproved transfers, failure to meet development obligations, any breach of confidentiality or unfair competition as described in Section 10, cross defaults, bankruptcy, foreclosure, insolvency, conviction of a felony, misrepresentations in the application, and/or repeated defaults, even if previously cured. This distinction between curable and non-curable defaults is common in franchising, providing franchisees an opportunity to correct certain issues while protecting the franchisor from more severe or repeated breaches of contract.
Upon termination, the developer will no longer have the right to develop or operate additional Aplus stores, except for those already under existing franchise agreements. The developer may continue to own and operate Aplus stores under these existing franchise agreements. This provision ensures that while the development agreement is terminated, existing franchise agreements remain in effect, allowing the franchisee to continue operating their established Aplus stores.