How can a Bang Cookies franchisee rebut the presumption of violating the agreement regarding know-how disclosure to family members?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee agrees that should Franchisee circumvent the restrictive covenants and obligations of this Article 6 by disclosing Confidential Information or Know-How to an Immediate Family Member, that Franchisor and the System, will be irreparably harmed. Franchisee agrees that if Franchisee or, one of Franchisee's Owners, discloses Confidential Information or Know-How to an immediate family member and, the immediate family member of Franchisee or an Owner, uses the Confidential Information or Know-How to engage in activities that, for Franchisee, qualify as Prohibited Activities, that Franchisor and the System will be irreparably harmed. Franchisee agrees that as between Franchisee and Franchisor, that Franchisee and Franchisee's Owners are in a better position to know if Franchisee permitted and/or provided an immediate family member with access to the Confidential Information or Know-How and that, therefore, Franchisee agrees that Franchisee will be presumed to have violated the terms of this Agreement and, in particular, the restrictive covenants and obligations set forth in this Article 6 if any member of Franchisee's immediate family or the immediate family of an Owner: (a) engages in any Prohibited Activities during any period of time during which Franchisee is prohibited from engaging in the Prohibited Activities; and/or (b) uses or discloses the Confidential Information and/or Know-How. Franchisee may rebut the foregoing presumption by providing evidence conclusively demonstrating that neither Franchisee nor Franchisee's Owners disclosed the Confidential Information and did not permit disclosure of the Confidential Information to the family member of Franchisee or Franchisee's Owner. Franchisee agrees that the foregoing covenants, obligations, representations, and burden of proof shall also apply to Franchisee's Owners and Spouses and, that Franchisee's Owners and Spouses shall each execute and deliver to Franchisor the Franchise Owner and Spouse Agreement and Guaranty in the form attached to this Agreement as Exhibit 1.
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies's 2024 Franchise Disclosure Document, a franchisee is presumed to have violated the franchise agreement if an immediate family member engages in prohibited activities or uses/discloses confidential information or know-how. This presumption arises if the family member's actions mirror activities the franchisee is restricted from doing during the agreement term.
However, the franchisee can challenge this presumption. To do so, the franchisee must provide conclusive evidence demonstrating that neither the franchisee nor their owners disclosed the confidential information or know-how. The evidence must also prove that they did not permit the disclosure of such information to the family member.
This clause places a significant burden on Bang Cookies franchisees to actively safeguard confidential information and know-how, even within their own families. Failure to prevent a family member's misuse of this information can lead to a presumption of breach, requiring the franchisee to provide compelling evidence of their innocence. This is stricter than many franchise agreements, which typically focus on the franchisee's direct actions rather than the actions of family members unless directly attributable to the franchisee.