What happens if an Aw franchisee defaults under the terms of the franchise agreement regarding the Protected Area?

According to Aw's 2025 Franchise Disclosure Document, as long as the Franchise Agreement is in effect and the franchisee is not in default under any of its terms, Aw will not establish another Papa Ray's Pizza Restaurant franchise or operate one itself or through an affiliate within the Protected Area. The Protected Area is described in Exhibit 1 of the Franchise Agreement. The minimum radius that a franchisee will be granted is three (3) miles from the Premises. However, if a franchisee defaults on the agreement, this protection is lost.

If a franchisee fails to meet the obligations outlined in the franchise agreement, Aw has the right to terminate the agreement. Section 15.1 outlines that termination can occur without an opportunity to cure the default. This means Aw can immediately terminate the agreement upon delivering a notice of termination to the franchisee. The FDD does not specifically state what constitutes a default regarding the Protected Area, but it can be inferred that any violation of the terms related to the Protected Area, such as unauthorized delivery or marketing activities outside the designated area, could lead to default.

In addition to terminating the agreement, Aw has the option to enter the premises and take control of the Papa Ray's Pizza Restaurant's operations if a default is not cured within fourteen (14) days after receiving written notice. During this period, the franchisee is responsible for covering the expenses incurred by Aw's agent or representative, including management fees, travel, room, board, and other reasonable costs. The franchisee must also indemnify Aw and its representatives against any claims arising from their operation of the restaurant during the default period. However, Aw is not obligated to operate the restaurant during the default.

Prospective Aw franchisees should carefully review the definition of default in the Franchise Agreement and understand the potential consequences of violating the terms related to the Protected Area. It is important to maintain compliance with all aspects of the agreement to avoid termination and potential financial losses.