Can Bambu terminate the franchise agreement if a Bambu franchisee's affiliate violates the restrictive covenants?

According to Bambu's 2025 Franchise Disclosure Document, Bambu can terminate the franchise agreement if a franchisee's affiliate intentionally or negligently violates the restrictive covenants outlined in Article 21. This is a significant point for prospective franchisees to consider, as the actions of their affiliates can directly impact their franchise agreement.

The FDD specifies that if a franchisee, its affiliates, principals, or any individual subject to the restrictive covenants intentionally or negligently violates those covenants, it constitutes grounds for termination. This clause extends the franchisee's responsibility to ensure that their affiliates also comply with the restrictive covenants, which typically include non-competition and confidentiality agreements.

This provision is relatively standard in franchising, as franchisors aim to protect their brand and system-wide interests. However, the specific terms and conditions of the restrictive covenants, as well as the definition of 'affiliates,' are crucial. A prospective Bambu franchisee should carefully review Article 21 of the franchise agreement to fully understand the scope of these restrictions and the potential consequences of non-compliance by their affiliates. It would be prudent to seek legal counsel to clarify these obligations before signing the agreement.