Is the effectiveness of the Azal Coffee Franchise Agreement dependent on the closing of the transaction under the Purchase Agreement?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
| THIS ADDENDUM is made the day of, 20, and modifies a |
|---|
| Franchise Agreement of the same date (the "Franchise Agreement") entered into by Durar Investment, LLC, a Michigan limited liability company, ("Franchisor") and |
| , a(" Franchisee "). In this |
| , a |
| A. Introduction . You entered into an agreement ("Purchase Agreement") for the |
| purchase of the Azal Coffee located at ("Store") from the current owner of the Store (the "Seller"). We and you |
| desire to amend the Franchise Agreement to reflect the fact that you are acquiring an open and |
| operating Store by transfer from one of our existing franchisees. All capitalized terms not otherwise |
| defined in this Addendum will have the same meaning as in the Franchise Agreement. |
| B. Contingency ; Date of Effectiveness of Franchise Agreement . The rights and |
| obligations of the parties under the Franchise Agreement are contingent on: (1) your completion of |
| our initial training program; and (2) the closing of the transaction under the Purchase Agreement and the transfer of possession and ownership of the Store to you. If these contingencies are not |
| met by, 20, we may, at our option, terminate the Franchise Agreement. If |
| we terminate the Franchise Agreement as provided in this Section, we will have the right to retain |
| the transfer fee paid by you (or the Seller) and otherwise the parties will have no further rights or |
| obligations to each other under the Franchise Agreement; provided that, the confidentiality and |
| non-competition provisions of the Franchise Agreement will survive the termination. If these |
| contingencies are met by the date specified above in this Section, then the Franchise Agreement |
| will become effective on the date that you receive possession and ownership of the Store (the "Effective Date"). |
| Ellective Date ). |
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, the effectiveness of the Franchise Agreement is contingent upon the closing of the transaction under the Purchase Agreement. Specifically, the rights and obligations outlined in the Franchise Agreement are dependent on two conditions: the franchisee completing Azal Coffee's initial training program and the successful closing of the transaction under the Purchase Agreement, which includes the transfer of possession and ownership of the store to the franchisee.
If these conditions are not met by a specified date, Azal Coffee has the option to terminate the Franchise Agreement. In the event of termination due to unmet contingencies, Azal Coffee retains the transfer fee paid by the franchisee (or the seller), and both parties are released from further obligations under the Franchise Agreement, with the exception of the confidentiality and non-competition provisions, which remain in effect.
Conversely, if both contingencies are successfully met by the specified date, the Franchise Agreement becomes effective on the date the franchisee receives possession and ownership of the Azal Coffee store. This clause ensures that the Franchise Agreement is only activated when the franchisee is fully prepared and legally able to operate the Azal Coffee franchise, protecting both the franchisee and franchisor from potential complications arising from incomplete transactions or inadequate training.