factual

Does the Baya Bar franchise agreement define what constitutes a material breach?

Baya_Bar Franchise · 2024 FDD

Answer from 2024 FDD Document

. 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.

18. POST-TERMINATION

  • 18.1 Franchisee's Obligations. Upon termination or expiration of this Agreement, all rights and licenses granted hereunder to Franchisee shall immediately terminate and Franchisee and each Principal, if any, shall:
    • 18.1.1 immediately cease to operate the Franchised Business, and shall not thereafter, directly or indirectly identify himself, herself or itself as a current Baya Bar owner, franchisee or licensee;
    • 18.1.2 immediately and permanently cease to use the Marks, any imitation of any Mark, Franchisor's designs, copyrighted material or other intellectual property, confidential or proprietary material or indicia of the Franchised Business, or use any trade name, trade or service mark or other commercial symbol that suggests an association with Franchisor, and/or Franchisor's affiliate(s), or the System. In particular, Franchisee shall cease to use, without limitation, all signs, billboards, advertising materials, displays, stationery, forms and any other articles, which display the Marks;
    • 18.1.3 take such action as may be necessary to cancel any assumed name or equivalent registration that contains the Mark or any other service mark or

  • trademark of Franchisor, and Franchisee shall furnish Franchisor with evidence of compliance with this obligation which is satisfactory to Franchisor, within five (5) days after termination or expiration of this Agreement;
  • 18.1.4 promptly pay all sums owing to Franchisor and its affiliates. Such sums shall include all damages, costs and expenses, including reasonable attorneys' fees, incurred by Franchisor as a result of any default by Franchisee. The payment obligation herein shall give rise to and remain, until paid in full, a lien in favor of Franchisor against any and all of the personal property, furnishings, equipment, fixtures, and inventory owned by Franchisee and located at the Franchised Business location at the time of default;
  • 18.1.5 pay to Franchisor all damages, costs and expenses, including reasonable attorneys' fees, incurred by Franchisor in connection with obtaining any remedy available to Franchisor for any violation of this Agreement and, subsequent to the termination or expiration of this Agreement, in obtaining injunctive or other relief for the enforcement of any provisions of this Agreement that survive its termination;
  • 18.1.6 immediately deliver at Franchisee's sole cost and expense, to Franchisor the Manual and all records, files, instructions, correspondence, invoices, agreements, designs, completed project signs, all confidential, proprietary and copyrighted material and all other materials related to operation of the Franchised Business, including but not limited to customer lists and records, (all of which are acknowledged to be Franchisor's property), delete all electronic copies and retain no copy or record of any of the foregoing, except Franchisee's copy of this Agreement and of any correspondence between the parties and any other documents that Franchisee reasonably needs for compliance with any provision of law;
  • 18.1.7 comply with the non-disclosure and non-competition covenants contained in Article 19; and
  • 18.1.8 in the event this Agreement is terminated due to Franchisee's default, pay Franchisor a lump sum payment (as liquidated damages and not as a penalty) in an amount equal to: (a) the average weekly Royalty Fee and Brand Fund Contribution payable by Franchisee over the twelve (12) month period immediately prior to the date of termination (or such shorter time period if the Franchised Business has been open less than twelve (12) months); (b) multiplied by the lesser of (i) twenty-four (24) months or (ii) the number of months then remaining in the then-current term of this Agreement. Franchisee acknowledges that a precise calculation of the full extent of the damages Franchisor will incur in the event of termination of this Agreement as a result of Franchisee's default is difficult to determine and that this lump sum payment is reasonable in light thereof.

Source: Item 22 — CONTRACTS (FDD page 56)

What This Means (2024 FDD)

Based on the 2024 Franchise Disclosure Document, the Baya Bar franchise agreement does not explicitly define what constitutes a 'material breach.' While the document outlines various obligations and restrictions for franchisees, it does not use the specific term 'material breach' to categorize violations of the agreement. The agreement does, however, address defaults and consequences of termination.

Item 18.1 outlines the franchisee's obligations upon termination or expiration of the agreement, including ceasing operation of the franchised business, discontinuing the use of Baya Bar's marks and intellectual property, and paying all sums owed to the franchisor and its affiliates. These obligations highlight the importance of adhering to the franchise agreement to avoid termination and its associated consequences.

Item 19.5.1 describes actions that the franchisee must avoid during the term of the agreement, such as diverting business, participating in competing businesses, or acting injuriously to the goodwill of the Baya Bar brand. Similarly, Item 19.5.2 outlines restrictions that continue even after the agreement expires or terminates, including non-compete clauses. While these sections detail prohibited conduct, they do not use the term 'material breach.'

Prospective franchisees should carefully review the entire franchise agreement and consult with legal counsel to understand what actions or omissions could lead to termination and the potential ramifications. It would be prudent to ask the franchisor for specific examples of franchisee conduct that could result in termination of the franchise agreement.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.