If Bang Cookies appoints a manager, is Bang Cookies liable for debts incurred by the Franchised Business?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
- (3) If, at any time, the Franchised Business is not being managed by a Managing Owner or Operating Manager who satisfactorily completed the Training Program, Franchisor is authorized, but is not required, to immediately appoint a manager to maintain the operations of the Franchised Business for and on behalf of Franchisee. Franchisor's appointment of a manager of the Franchised Business does not relieve Franchisee of its obligations or constitute a waiver of Franchisor's right to terminate the Franchise pursuant to Article 16. Franchisor is not liable for any debts, losses, costs or expenses incurred in the operations of the Franchised Business or to any creditor of Franchisee for any products, materials, supplies or services purchased by the Franchised Business while it is managed by Franchisor's appointed manager. Franchisor has the right to charge fees and expenses, as determined by Franchisor, in Franchisor's Reasonable Business Judgment, for management services (the "Management Service Fees"). Any determination as to whether or not Franchisor may elect to provide management services, if any, and the extent of such services, and/or the discontinuation thereof, shall be exclusively determined by Franchisor in Franchisor's Reasonable Business Judgment. The Management Service Fee shall be immediately payable upon invoice by us.
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies' 2024 Franchise Disclosure Document, if the franchisor appoints a manager to maintain operations of the franchised business on behalf of the franchisee, Bang Cookies is not liable for any debts, losses, costs, or expenses incurred in the operations of the franchised business. This also applies to any creditor of the franchisee for products, materials, supplies, or services purchased by the franchised business while managed by Bang Cookies' appointed manager.
This means that as a Bang Cookies franchisee, you remain responsible for all financial obligations of your business, even if Bang Cookies steps in to manage the operations temporarily. Bang Cookies has the right to charge fees and expenses for these management services, with the specific amounts determined by Bang Cookies in its reasonable business judgment. These management service fees are payable immediately upon invoicing.
The FDD states that Bang Cookies has the right to determine whether or not to provide management services, the extent of such services, and the discontinuation of those services, with all such decisions made exclusively by Bang Cookies in its reasonable business judgment. This clause protects Bang Cookies from liability and ensures that the franchisee understands they are ultimately responsible for their business's financial health, even during periods of management by the franchisor.
As a prospective franchisee, it is important to understand that Bang Cookies' decision to provide management services does not constitute a waiver of their right to terminate the franchise agreement. The franchisee is still responsible for fulfilling all obligations outlined in the agreement, and failure to do so can result in termination, regardless of whether Bang Cookies has temporarily managed the business. Franchisees should carefully consider the potential costs of management services and ensure they have sufficient working capital to meet their obligations.