What rights does Auntie Annes require in the lease upon expiration or termination of the franchise agreement?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
You must use commercially reasonable efforts to ensure that all Leases include, unless we agree otherwise in writing:
(i) a provision which requires the landlord concurrently to provide us with a copy of any written notice of breach or default under the Lease sent to you, and which grants to us the right (but not the obligation) to cure any defaults under the Lease within a reasonable time (not to exceed 15 days for monetary defaults and 30 days for non-monetary defaults);
(ii) a provision that provides that upon the expiration or termination of this Agreement or upon your default under the Lease or under this Agreement, we will, without your or the landlord's further consent, have (a) a continuing right of entry into the Franchised Business, (b) the right to operate a Business at the Accepted Location, (c) the right, but not the obligation, to assume your interests under the existing terms, conditions and covenants of the Lease, and (d) should we assume your position under the Lease, the right to assign the Lease or sublet the premises to a third party which will operate a Business at the location;
(iii) a provision that provides that upon expiration or termination of the Lease, we will, without your or the landlord's further consent, have a continuing right of entry into the Franchised Business to remove Proprietary Products and any materials bearing the Marks;
(iv) a provision that provides that the Lease may not be modified or amended without our written consent which will not unreasonably be withheld, conditioned or delayed by us;
Source: Item 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, franchisees must make commercially reasonable efforts to ensure that all leases include specific provisions that protect Auntie Annes's interests. Upon the expiration or termination of the franchise agreement, or upon the franchisee's default under the lease or franchise agreement, Auntie Annes wants to ensure it has certain rights without needing further consent from the franchisee or landlord. These rights include a continuing right of entry into the franchised business and the right to operate a business at the accepted location.
Additionally, Auntie Annes seeks the right, but not the obligation, to assume the franchisee's interests under the existing terms, conditions, and covenants of the lease. If Auntie Annes assumes the franchisee's position under the lease, it also wants the right to assign the lease or sublet the premises to a third party who will operate an Auntie Annes business at the location. This provision allows Auntie Annes to maintain a presence in the location even if the original franchisee is no longer operating the business.
Auntie Annes also requires a provision in the lease that grants them a continuing right of entry into the franchised business to remove proprietary products and any materials bearing the Auntie Annes marks upon the expiration or termination of the lease. Furthermore, the lease cannot be modified or amended without Auntie Annes's written consent, which Auntie Annes states will not be unreasonably withheld, conditioned, or delayed. These stipulations ensure that Auntie Annes can protect its brand and operational standards, even after a franchise agreement ends.
These requirements are fairly typical in franchise agreements, as they allow the franchisor to maintain control over the location and brand. Prospective Auntie Annes franchisees should carefully review the lease terms to ensure they understand these obligations and potential implications. It is important to note that these terms are subject to negotiation, and the franchisee should seek legal counsel to ensure the lease terms are reasonable and protect their interests as much as possible while still meeting Auntie Annes's requirements.