What constitutes a material default in the event of death or permanent disability of a Baya Bar Developer?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
administrator, conservator, or other personal representative of Developer shall be required to transfer Developer's interest in this Agreement within six (6) months from the date of death or permanent disability to a third party approved by Franchisor. Failure to transfer in accordance with the forgoing will constitute a material default and all that is granted by this Agreement will terminate. A transfer under this Section 6.6, including without limitation, transfer by devise or inheritance, is subject to the conditions for Transfers in this Article 6 and unless transferred by gift, devise, or inheritance, subject to the terms of Section 6.5 above. For purposes of this Agreement, the term "permanent disability" means a mental or physical disability, impairment or condition that is reasonably expected to prevent or actually does prevent such person from providing continuous and material supervision of the operation of Developer's Baya Bar outlet(s) and remaining development schedule during the six (6)-month period from its onset.
Immediately after the death or permanent disability of such person, or while the rights granted under this Agreement is owned by an executor, administrator, guardian, personal representative or trustee of that person, the Developer's Baya Bar outlet(s) and remaining development schedule shall be supervised by an interim successor manager satisfactory to Franchisor, or Franchisor, in its sole discretion, may provide interim management at a fee equal to twenty percent (20%) of the Gross Revenue generated by the Developer's Baya Bar outlet(s) during Franchisor's operation thereof, plus any and all costs of travel, lodging, meals and other expenses reasonably incurred by Franchisor, pending transfer of the Developer's Baya Bar outlet(s) and remaining development schedule to the deceased or disabled individual's lawful heirs or successors.
Source: Item 23 — RECEIPTS (FDD pages 56–189)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, a material default occurs if the interest in the Development Agreement is not transferred within six months of the developer's death or permanent disability. The agreement defines "permanent disability" as a mental or physical condition that prevents the developer from continuously supervising the Baya Bar outlet's operation and development schedule during the six-month period following the onset of the disability.
During this six-month period, or while the rights under the agreement are held by an executor, administrator, guardian, personal representative, or trustee, the Baya Bar outlet and development schedule must be supervised by an interim successor manager approved by Baya Bar. Alternatively, Baya Bar can provide interim management, charging a fee equal to 20% of the Gross Revenue generated by the outlet, plus all costs of travel, lodging, meals, and other expenses incurred. This arrangement is pending the transfer of the outlet and development schedule to the deceased or disabled individual's heirs or successors.
This provision ensures business continuity and protects Baya Bar's interests in the event of unforeseen circumstances affecting the developer. The requirement to transfer the interest within six months aims to maintain active management and adherence to the development schedule. The option for Baya Bar to provide interim management offers a safety net, albeit at a significant cost to the estate or heirs, highlighting the importance of having a succession plan or key person insurance in place.