What happens if the Aw franchisee is in default under any of the terms of the franchise agreement regarding the establishment of another Papa Ray's Pizza Restaurant within the Protected Area?

According to Aw's 2025 Franchise Disclosure Document, if a franchisee is in default under any terms of the franchise agreement, Aw is no longer obligated to protect the franchisee's protected area. Specifically, Aw is allowed to establish another Papa Ray's Pizza Restaurant franchise or operate its own Papa Ray's Pizza Restaurant within the franchisee's protected area if the franchisee is in default. This means the franchisee loses the exclusivity they would normally have within their defined territory.

This has significant implications for a prospective Aw franchisee. The protected area is a key element of the franchise agreement, offering a degree of market exclusivity. If the franchisee fails to meet the obligations of the franchise agreement, such as maintaining standards or making payments, Aw can essentially negate this protection. This could lead to direct competition from another Aw franchise or a company-owned store, potentially impacting the franchisee's revenue and profitability.

It is important to understand what constitutes a default under the franchise agreement and what steps a franchisee can take to remedy a default. Prospective franchisees should carefully review the default provisions in Section 15 of the franchise agreement and seek legal counsel to fully understand their rights and obligations. Maintaining compliance with all terms of the agreement is crucial to preserving the protected area and the potential benefits it offers.