What happens if a Bang Cookies franchisee is in default of the terms of the Multi-Unit Development Agreement?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
his Agreement will be for a term (the" Term") that commences as of the Effective Date and, unless earlier terminated by Franchisor, will automatically end on the earlier of (a) the last day of the calendar month that the final Development Shop is required to be opened and operating under the Development Schedule, (b) the day the final Shop is open, or (c) the date of termination of this Agreement pursuant to the terms of this Agreement. Upon expiration or termination of this Agreement for any reason, Franchisee will not have any rights within the Development Area other than territorial rights that may have been granted to Franchisee and maintained by Franchisee pursuant to the terms of any and/or each respective Franchise Agreement. The Term may not be renewed or extended.
3.2 TERMINATION BY FRANCHISOR
Franchisor possesses the right, at Franchisor's option, to terminate this Agreement and all rights granted to Franchisee hereunder, without affording Franchisee with any opportunity to cure such default, effective upon written notice to Franchisee, or automatically upon the occurrence of any of the following events: (a) if Franchisee Abandons Franchisee's obligations under this Agreement; (b) if Franchisee for four consecutive months, or any shorter period that indicates an intent by Franchisee to discontinue Franchisee's development of Shops within the Development Area; (c) if Franchisee becomes insolvent or is adjudicated bankrupt, or if any action is taken by Franchisee, or by others against the Franchisee, under any insolvency, bankruptcy or reorganization act, or if Franchisee makes an assignment for the benefit or creditors or a receiver is appointed by the Franchisee;
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies's 2024 Franchise Disclosure Document, the franchisor has the right to terminate the Multi-Unit Development Agreement if the franchisee defaults. Bang Cookies can terminate the agreement and all rights granted to the franchisee immediately upon written notice, without providing an opportunity to cure the default.
Reasons for termination include if the franchisee abandons their obligations under the agreement, discontinues shop development for four consecutive months (or a shorter period indicating intent to discontinue), becomes insolvent or bankrupt, fails to meet development obligations under the Development Schedule (such as failing to open and maintain the required number of Bang Cookies shops), or if any single Franchise Agreement is terminated for any Development Shop or any other Franchise Agreement between Bang Cookies and the franchisee.
This means a potential Bang Cookies multi-unit franchisee could lose their development rights without a chance to fix the problem if certain conditions occur. It is important to carefully review the Development Schedule and ensure sufficient capital and resources are available to meet the development obligations. Franchisees should also be aware of the implications of insolvency or bankruptcy on their development agreement. The Development Area Fee, which is paid upon execution of the agreement, is not refundable, so the franchisee would lose this fee if the agreement is terminated.