In the event of a Bambu MUD Agreement termination due to failure to meet the Development Schedule, are cross-default provisions in existing Franchise Agreements applicable?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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 the MUD (Multi-Unit Development) Agreement is terminated solely because the franchisee failed to meet the Development Schedule, the cross-default provisions in existing Franchise Agreements will not apply. This means that the termination of the MUD Agreement for this specific reason will not automatically trigger a default or termination of any existing individual Franchise Agreements between the franchisee and Bambu. The existing Franchise Agreements will remain in full force and effect, regardless of the MUD Agreement termination.
However, it's important to note that this protection only applies if the MUD Agreement is terminated solely due to failure to meet the Development Schedule. If the MUD Agreement is terminated for any other reason, such as a default under any other term of the MUD Agreement or a default under any of the existing Franchise Agreements, then Bambu has the option to terminate all Franchise Agreements executed in furtherance of the MUD Agreement. This highlights the importance of adhering to all terms of the MUD Agreement and the individual Franchise Agreements to avoid potential cross-default scenarios.
This provision offers a degree of protection to franchisees who may face challenges in meeting the development schedule outlined in the MUD Agreement. It prevents the loss of existing, operating Bambu locations solely due to development delays, provided all other agreements are in good standing. Franchisees should carefully review the terms of both the MUD Agreement and the Franchise Agreements to fully understand their rights and obligations, and to be aware of the circumstances under which cross-default provisions may be invoked.