What constitutes an Event of Default related to card sales or chargebacks for Atwell Suites?

According to the 2025 Atwell Suites Franchise Disclosure Document, an Event of Default can occur due to "Irregular Card sales by you, excessive Chargebacks, or any other circumstances which, in our sole discretion, may increase our exposure for your Chargebacks or otherwise present a financial or security risk to us." This gives Atwell Suites broad discretion to declare a default based on its assessment of risk related to a franchisee's card sales and chargeback activity.

This clause is significant for prospective Atwell Suites franchisees because it means that the franchisor has the power to declare a default, potentially leading to termination of the franchise agreement, based on subjective criteria. What constitutes "irregular" card sales or "excessive" chargebacks is not clearly defined, leaving room for interpretation by Atwell Suites. This could create uncertainty and potential disputes between the franchisor and franchisee.

Furthermore, Atwell Suites can take action if any circumstances, in their "sole discretion," increase their exposure to chargebacks or present a financial or security risk. This clause could be triggered by various factors, some of which may be outside the franchisee's direct control. Therefore, franchisees need to maintain diligent oversight of their card sales practices and chargeback rates to mitigate the risk of default. It would be prudent for a potential franchisee to seek clarification from Atwell Suites regarding the specific metrics and thresholds used to evaluate card sales and chargeback activity to better understand and manage this risk.