Can Auntie Annes terminate the agreement if the franchisee or their owners are convicted of a felony?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
- 17.2 Our Termination: No Opportunity to Cure. We have the right to terminate this Agreement without affording you any opportunity to cure the default, effective on our sending of notice of termination to you (or the earliest date permitted by applicable law) if:
- C. You or any of your Owners, officers, or directors: (i) are convicted of or plead no contest to a felony or a crime involving fraud or moral turpitude or any other crime that we deem
likely to have an adverse effect on the good name, business, goodwill, image or reputation of the Franchised Business, the System, or the Marks, whether on a local, regional, or national scale (including any such convictions or pleas that occurred prior to the Effective Date that we learn of after the Effective Date); (ii) engage in fraudulent, deceptive, unethical, criminal, or other conduct that, in our determination, is likely to have an adverse effect on the good name, business, goodwill, image, or reputation of the Franchised Business, the System, or the Marks, whether on a local, regional, or national scale; (iii) make, or have made, any material misrepresentation to us related to the Franchised Business or this Agreement; or (iv) knowingly maintain false books or records or submit any false reports to us related to the Franchised Business.
Source: Item 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, Auntie Annes has the right to terminate the franchise agreement without providing an opportunity to cure the default if the franchisee, their owners, officers, or directors are convicted of a felony. This also applies if they plead no contest to a felony or a crime involving fraud, moral turpitude, or any other crime that Auntie Annes deems likely to have an adverse effect on the brand's reputation. This includes convictions or pleas that occurred before the effective date of the agreement but are discovered after.
This provision gives Auntie Annes broad authority to terminate the agreement based on criminal activity of the franchisee or related parties, even if the crime is not directly related to the operation of the franchise. The determination of whether a crime has an adverse effect on the brand's reputation is at Auntie Annes's discretion, which introduces an element of subjectivity and risk for the franchisee.
It is important for prospective Auntie Annes franchisees to understand the scope of this termination clause and the potential consequences of any criminal convictions or pleas, even those unrelated to the business. Franchisees should seek legal counsel to fully understand their rights and obligations under the franchise agreement, particularly regarding termination clauses.