What is the consequence if a Bambu Franchisee defaults on any term of a subsequent Franchise Agreement?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
- 4.3. Termination by Bambu. Franchisee shall be deemed in default and this MUD Agreement may be terminated by Bambu, at its option, in the following circumstances:
- (i) Franchisee defaults on any term or condition of this MUD Agreement, including without limitation, the failure to open and maintain the number of shoppes required by the Development Schedule, and fails to cure such default after 30 days written notice to Franchisee; or
- (ii) Franchisee is in default under any of the Franchise Agreements executed in furtherance of this MUD Agreement or any other agreement between Bambu or any of Bambu's
affiliates and Franchisee or any of Franchisee's affiliates and fails to cure such default within the time periods specified in such other agreements.
- 4.4. Continued Effectiveness of Franchise Agreements. If this MUD Agreement is terminated due solely to a failure by Franchisee to meet the Development Schedule, Bambu and Franchisee agree that such termination shall not constitute a default or result in a termination of any Franchise Agreements executed between Franchisee and Bambu in effect as of the date of termination of this MUD Agreement. In that case, those Franchise Agreements shall continue in full force and effect notwithstanding the termination of this MUD Agreement. Bambu and Franchisee agree that any statements to the contrary in the Franchise Agreements executed by them, including any cross-default and cross-termination provisions, will be inapplicable in the situation of a termination of this MUD Agreement based solely on Franchisee's failure to meet the Development Schedule. If this MUD Agreement is terminated due to any other default under Section 4.3 above, all Franchise Agreements executed in furtherance of this MUD Agreement and all other agreements between Bambu and Franchisee or any of Franchisee's affiliates may, at Bambu's sole option, be terminated.
Source: Item 23 — Receipts (FDD pages 52–209)
What This Means (2025 FDD)
According to Bambu's 2025 Franchise Disclosure Document, if a franchisee defaults on any term or condition of a Franchise Agreement, Bambu has the option to terminate the Multi-Unit Development (MUD) Agreement. This is applicable if the Franchise Agreements were executed to further the MUD Agreement. Additionally, any other agreements between Bambu, its affiliates, and the franchisee or their affiliates may also be terminated at Bambu's discretion if the franchisee fails to address the default within the specified time frames outlined in those agreements.
This provision means that a default on one franchise location can have significant repercussions for a Bambu franchisee with multiple locations under a MUD Agreement. The franchisee risks losing not only the individual franchise where the default occurred but also the entire development agreement and potentially all associated franchise agreements. This cross-default clause is a critical consideration for franchisees planning to expand with Bambu, as it ties the performance of all locations together.
It is important to note the distinction made in the FDD regarding termination due to failure to meet the Development Schedule. If the MUD Agreement is terminated solely because the franchisee did not meet the Development Schedule, existing Franchise Agreements remain in effect. However, any other default under Section 4.3 allows Bambu to terminate all Franchise Agreements executed in furtherance of the MUD Agreement. This highlights the importance of adhering to the Development Schedule but also underscores that other defaults carry more severe consequences.
Prospective franchisees should carefully evaluate their ability to manage and maintain compliance across all locations to avoid triggering the cross-default provisions. Understanding the specific terms and conditions of both the Franchise Agreements and the MUD Agreement is essential to mitigating the risk of a widespread termination due to a single default.