Does the obligation for an Azal Coffee franchisee to reimburse Azal Coffee's expenses include instances where Azal Coffee initiates a legal proceeding but fails to substantially prevail?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
4.13 Manner and Timing of Payment.
Your payments to us for royalty, local advertising fees, marketing fund contributions, mobile application and technology fees, training, renewal and transfer fees, management fees, mystery shopper fees, relocation fees, litigation expenses, late charges and interest, amounts owed for products or services provided by us or our affiliates, amounts owed for maintenance expenses we incur under Section 8.8, amounts owed for management fees, amounts owed for liquidated damage amounts, and all other amounts you owe to us or our affiliates must be made by electronic or similar funds transfer in the appropriate amounts from your bank account to our accounts, and at the places or in the manner we may specify. You must make payments at the times specified in this Agreement or as we may otherwise specify. You agree that we may specify payment by electronic fund transfers that we initiate. You must sign and deliver to your bank and to us the documents necessary to authorize and effectuate fund transfers as specified by us. You agree not to terminate the authorization as long as this Agreement is in effect. You agree not to close your bank account without providing us prior written notice and establishing a substitute bank account for the transfers. You also agree to make all required payments to us daily or weekly or at some other interval, instead of monthly or as otherwise provided in this Agreement, if we specify. You acknowledge that we may require you to make required payments at different intervals than other Azal Coffee franchisees.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
Based on the 2024 Franchise Disclosure Document, the Azal Coffee franchise agreement stipulates that franchisees are responsible for covering litigation expenses. Section 4.13 details that franchisees must make payments to Azal Coffee for various fees and expenses, including litigation expenses. This obligation extends to "all other amounts you owe to us or our affiliates."
Section 4.13 does not explicitly state that Azal Coffee must substantially prevail in a legal proceeding for the franchisee to be responsible for litigation expenses. Therefore, it is implied that a franchisee could be responsible for litigation expenses even if Azal Coffee does not win the legal case. This could create a financial risk for the franchisee, as they may have to cover legal costs even if the outcome of the litigation is not in Azal Coffee's favor.
Franchisees should be aware of this provision and consider the potential financial implications. It is advisable to seek clarification from Azal Coffee regarding the circumstances under which a franchisee would be responsible for litigation expenses, especially in cases where Azal Coffee does not substantially prevail in the legal proceeding. Understanding this aspect of the franchise agreement is crucial for making an informed decision about investing in an Azal Coffee franchise.