What happens if an Azal Coffee franchisee loses the right to occupy the Franchise Location?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
- Use.** The Premises must not be used for any purpose other than the operation of an Azal Coffee during the term of the Lease, including renewals.
- 3. Franchisor's Options. Landlord and Franchisee grant to Franchisor the exclusive right, exercisable at the option of Franchisor, to be assigned all right, title and interest of Franchisee in and to the Lease and the Premises:
- a. on the expiration or termination of the Franchise Agreement. Franchisor must give written notice of its intent to exercise this option within thirty (30) days of the event triggering the option;
- b. on the expiration or termination of the Lease or on Franchisee's loss of its rights of possession to the Premises, whether by Franchisee's default under the Lease or otherwise. Landlord shall provide Franchisor notice of default as provided under Section 9 and Section 10. Franchisor shall exercise its right to accept assignment of the Lease within such periods; and
- c. on Franchisees abandonment of the Premises. For this purpose, abandonment will be conclusively presumed if Franchisee fails to have the business open and fully operational for two (2) consecutive days.
On the giving of notice of exercise by Franchisor under this Section, the Lease, and all right, title and interest of Franchisee under the lease and to the Premises will be automatically, and without need of further instrument, assigned to Franchisor. If Franchisor does not give notice of exercise within the applicable time period, Franchisor will be deemed to have forfeited all its rights under this Section. Landlord and Franchisee agree to execute documents confirming this assignment in the form presented by Franchisor, including a short form of Lease suitable for recording.
4. Franchisor's Rights. Upon Franchisor's exercise of its option to accept assignment of the Lease, Franchisee shall remain liable for any amounts owing, or any other default occurring,
prior to the effective date of the assignment. Franchisor shall not be liable for any amounts owing by Franchisee and shall have no obligation to cure any default of franchisee before taking assignment of the Lease and possession of the Premises. Franchisor shall succeed to all of the Franchisee's rights, options, and obligations under the Lease commencing on the effective date of the assignment and shall have the right to transfer or assign the Lease to another Azal Coffee franchisee without the need to seek consent form Landlord. Franchisor's transfer to another Azal Coffee franchisee relieves Franchisor from any further liability under the Lease. The terms of this Addendum shall remain in full force and effect as to such franchisee-transferee.
- 5. Liability of Guarantors. The guaranty of any guarantors of the Lease will only apply to obligations arising during the initial term of the Lease.
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- Franchisor's Designated Architect and General Contractor.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, if a franchisee loses the right to possess their franchise location, the franchisor has specific options. The landlord must notify Azal Coffee of any default, and Azal Coffee then has the right to accept assignment of the lease. If Azal Coffee chooses to exercise this right, the franchisee's rights to the lease and premises are automatically assigned to Azal Coffee without needing any further documentation. However, if Azal Coffee does not provide notice of exercising this option within the specified time, they forfeit their rights.
This clause is included in the franchise agreement to protect Azal Coffee's interests and ensure business continuity. By stepping in and taking over the lease, Azal Coffee can maintain a presence in that location, either by operating the franchise themselves or finding a new franchisee. This prevents a competitor from taking over the site and potentially benefiting from the goodwill established by the previous Azal Coffee franchisee.
In the event of the Franchise Agreement expiring or terminating, the franchisee's rights to use Azal Coffee's intellectual property and franchise systems cease. The franchisee must discontinue using all related trademarks, logos, and confidential information. They must also stop all advertising and remove any signs or materials identifying them as an Azal Coffee franchisee. Furthermore, the franchisee is responsible for the costs associated with removing signs and other identifying materials and returning them to Azal Coffee. If the franchisee remains in possession of the location, they must alter it to differentiate it from an Azal Coffee store.
Azal Coffee also has a lien against the furnishings, fixtures, equipment, and all other assets of the Franchise Business, including the franchisee's interest in the Lease and the Location, until all payments are made and any damages, costs, and expenses incurred by Azal Coffee have been paid.