Does Azal Coffee have an option to purchase the franchisee's assets upon termination of the franchise agreement?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
ARTICLE 16 - EFFECT OF TERMINATION OR EXPIRATION
16.1 Your Obligations on Expiration or Termination.
If this Agreement expires or terminates for any reason (including termination on a transfer), your rights to use the Intellectual Property and the Franchise Systems and all other rights associated with being an authorized Azal Coffee franchisee will cease and you must do the following:
- (a) You must immediately and permanently discontinue the use of the Intellectual Property, the Confidential Information, the Franchise Systems, and any trademarks, names, and logos confusingly similar to the Marks or Trade Dress, and any other materials that may, in any way, indicate that you are or were an Azal Coffee franchisee, or in any way associated with us.
- (b) You must immediately discontinue all advertising placed or ordered. You must remove and deliver to us all sign faces, advertising and promotional material, letterhead, forms, and any other items containing the Intellectual Property or the Confidential Information. You are responsible for the cost of sign and other identification removal and the cost of shipping signs and other materials to us. If you remain in possession of the Franchise Location, you must alter the premises to distinguish the premises from the appearance of a Store.
- (c) You must cease using the Brand Standards Manual, the Confidential Information, and all other proprietary business information provided by us and must return to us all copies of the Brand Standards Manual, the Confidential Information, and other bulletins or other materials received from us containing information about the Intellectual Property and Stores.
- (d) You must immediately and permanently cease to use all telephone and fax numbers, email addresses, website addresses, domain names and other electronic media that have been used in the Franchise Business (the "Telephone Numbers" and "Electronic Media") and if requested by us, must assign some or all of these Telephone Numbers and Electronic Media to us. You acknowledge that as between you and us, we have the sole right to all Telephone Numbers and Electronic Media used in the Franchise Business and all written and online directory listings associated with the Franchise Business. You authorize us, and appoint us and any of our officers as your attorney-in-fact, to direct the applicable service providers and all listing agencies to transfer those items to us or our agent or assignee if you fail or refuse to do so. You authorize the applicable service providers and all listing agencies to accept the direction in this Agreement as conclusive evidence of our exclusive rights in the Telephone Numbers and Electronic Media and directory listings and our authority to direct their transfer.
- (e) You must cease using any business name containing any of the Marks and must file an abandonment or discontinuance of the name with the appropriate local, county or state agency.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, upon termination of the franchise agreement, the franchisee's rights to use Azal Coffee's intellectual property and franchise systems will cease. The franchisee must discontinue using all related trademarks, names, logos, and other materials that indicate they were an Azal Coffee franchisee. Additionally, the franchisee is responsible for removing and delivering all signs, advertising, and promotional materials containing Azal Coffee's intellectual property, and they must alter the premises to distinguish it from an Azal Coffee store if they remain in possession of the location. The franchisee is responsible for the costs associated with sign removal and shipping these materials to Azal Coffee.
Furthermore, the franchisee must cease using the Brand Standards Manual, confidential information, and all other proprietary business information provided by Azal Coffee, returning all copies of these materials. They must also discontinue using all telephone and fax numbers, email addresses, website addresses, domain names, and other electronic media associated with the franchise business. If requested by Azal Coffee, the franchisee must assign these telephone numbers and electronic media to them. Azal Coffee retains the sole right to all telephone numbers and electronic media used in the franchise business and all written and online directory listings associated with it.
The 2024 FDD also states that Azal Coffee has a lien against all furnishings, fixtures, equipment, and other assets of the franchise business, as well as the franchisee's interest in the lease and location, until all payments, damages, costs, and expenses owed to Azal Coffee are paid. This lien provides Azal Coffee with a security interest in the franchisee's assets to ensure that all financial obligations are met. However, the FDD does not explicitly state that Azal Coffee has the option to purchase the franchisee's assets upon termination of the franchise agreement, only that they have a lien against them.