In the event of a default by a Baya Bar franchisee, what options does the franchisor have besides termination?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
In the event of a default by Franchisee, in addition to Franchisor's right to terminate the Franchise Agreement, and not in lieu thereof, Franchisor may, but has no obligation to:
- 17.4.1 effect a cure on Franchisee's behalf and at Franchisee's expense, and Franchisee shall immediately pay Franchisor the costs incurred by Franchisor upon demand; or
- 17.4.2 enter upon the Franchised Business location and exercise complete authority with respect to the operation thereof until such time as Franchisor determines that the default of Franchisee has been cured and that Franchisee is complying with the requirements of this Agreement. Franchisee specifically agrees that a designated representative of Franchisor may take over, control and operate the Franchised Business. In addition to all other fees paid under this Agreement, Franchisee shall pay Franchisor ten percent (10%) of the Gross Revenue generated by the Franchised Business during Franchisor's operation thereof as compensation therefor. Further, Franchisee shall reimburse Franchisor for the full compensation paid to such representative including the cost of all fringe benefits plus all travel expenses, lodging, meals and other expenses reasonably incurred by such representative until the default has been cured and Franchisee is complying with the terms of this Agreement.
- 17.5 Notice to Suppliers. In the event of a default by Franchisee, in addition to Franchisor's right to terminate the Franchise Agreement, and not in lieu thereof, Franchisor reserves the right with five (5) days' prior written notice to Franchisee to direct suppliers to stop furnishing any and all products and supplies until such time as Franchisee's default is cured. In no event shall Franchisee have recourse against Franchisor for loss of revenue, customer goodwill, profits or other business arising from Franchisor's actions and the actions of suppliers.
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, besides termination of the franchise agreement, Baya Bar has other options in the event of a franchisee default. Baya Bar can choose to cure the default on behalf of the franchisee, at the franchisee's expense, with the franchisee required to immediately pay the costs incurred by Baya Bar upon demand.
Another option available to Baya Bar is to enter the franchised business location and exercise complete authority over its operation. This control continues until Baya Bar determines that the default has been resolved and the franchisee is complying with the agreement. During this period, a designated representative of Baya Bar can take over, control, and operate the business. The franchisee is required to pay Baya Bar 10% of the Gross Revenue generated during this operational period as compensation.
Furthermore, the franchisee must reimburse Baya Bar for the full compensation paid to the representative, including fringe benefits, travel expenses, lodging, meals, and other reasonable expenses. Baya Bar also reserves the right, with five days' prior written notice to the franchisee, to direct suppliers to stop furnishing products and supplies until the default is cured. The franchisee bears the risk of any loss of revenue, customer goodwill, or profits resulting from these actions by Baya Bar and its suppliers.