What costs can Bambu deduct from compensation owed to a franchisee in Hawaii upon termination or non-renewal?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 482E-6(3) of the Hawaii Revised Statutes provides that upon termination or refusal to renew the Franchise, Bambu is obligated to compensate Franchisee for the fair market value, at the time of the termination or expiration of the Franchise, of Franchisee's inventory, supplies, equipment and furnishings purchased from Bambu or a Supplier designated by Bambu; provided that personalized materials which have no value to Bambu need not be compensated for. If Bambu refuses to renew a Franchise for the purpose of converting Franchisee's business to one owned and operated by Bambu, Bambu, in addition to the remedies provided above, shall compensate Franchisee for the loss of goodwill. Bambu may deduct from such compensation reasonable costs incurred in removing, transporting and disposing of Franchisee's inventory, supplies, equipment and furnishings pursuant to this requirement, and may offset from such compensation any monies due Bambu.
Source: Item 23 — Receipts (FDD pages 52–209)
What This Means (2025 FDD)
According to Bambu's 2025 Franchise Disclosure Document, a Hawaii Rider to the Franchise Agreement addresses compensation upon termination or non-renewal. Specifically, Section 482E-6(3) of the Hawaii Revised Statutes mandates that Bambu compensate the franchisee for the fair market value of inventory, supplies, equipment, and furnishings purchased from Bambu or its designated suppliers at the time of termination or expiration. An exception exists for personalized materials that hold no value for Bambu, which do not require compensation. If Bambu refuses to renew the franchise to convert it to a company-owned operation, Bambu must also compensate the franchisee for the loss of goodwill.
From this compensation, Bambu is permitted to deduct certain costs. These include reasonable expenses incurred for the removal, transportation, and disposal of the franchisee's inventory, supplies, equipment, and furnishings. Additionally, Bambu can offset from the compensation any monies that the franchisee owes to Bambu.
This stipulation is important for prospective franchisees in Hawaii as it outlines the financial obligations and potential deductions that may arise during termination or non-renewal. Understanding these deductions can help franchisees better prepare for potential financial implications at the end of their franchise term. It is also important to note that the Hawaii Franchise Investment Law may provide additional protections and rights to the franchisee, which cannot be waived by any release executed.