Under what conditions can Baya Bar terminate the franchise agreement without allowing the franchisee an opportunity to cure the default?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
against Franchisee's business or property; or if suit to foreclose any lien or mortgage against the Franchised Business premises or equipment is instituted against Franchisee and not dismissed within thirty (30) days.
- 17.2 Defaults With No Opportunity to Cure. Franchisee shall be deemed to be in material default and Franchisor may, at its option, terminate this Agreement and all rights granted hereunder, without affording Franchisee any opportunity to cure the default, effective immediately upon notice to Franchisee, if Franchisee, or any Principal, as the case may be:
- 17.2.1 fails to acquire a site for the Franchised Business, complete construction of the Franchised Business, obtain all licenses and permits before opening, or open the Franchised Business within the time and in the manner specified in Article 8.
- 17.2.2 falsifies any report required to be furnished Franchisor hereunder;
- 17.2.3 ceases to operate the Franchised Business for a period of five (5) days or more; provided, however, that this provision shall not apply if through no fault of Franchisee, the premises are damaged or destroyed by a casualty and Franchisee applies within thirty (30) days after such event, for Franchisor's approval to relocate or reconstruct the premises (which approval shall not be unreasonably withheld) and Franchisee diligently pursues such reconstruction or relocation.
- 17.2.4 loses for any cause whatsoever the right of possession of the real property on which the Franchised Business is located; provided, however, that this provision shall not apply if through no fault of Franchisee, Franchisee loses right of possession and Franchisee applies within thirty (30) days after such event, for Franchisor's approval to relocate the Franchised Business (which approval shall not be unreasonably withheld) and Franchisee diligently pursues such relocation in accordance with Section 8.5.
- 17.2.5 fails to restore the Franchised Business location to full operation within a reasonable period time but not more than one hundred twenty (120) days from the date the Franchised Business location is rendered inoperable by any casualty, as may be extended by Franchisor in Franchisor's reasonable discretion;
- 17.2.6 fails to comply with any federal, state or local law, rule or regulation, applicable to the operation of the Franchised Business, including, but not limited to, the failure to pay taxes;
- 17.2.7 defaults under any lease or sublease of the real property on which the Franchised Business is located;
- 17.2.8 understates Gross Revenue on two (2) occasions or more, whether or not cured on any or all of those occasions;
- 17.2.9 fails to comply with the covenants in Article 15;
- 17.2.10 permits a Transfer in violation of the provisions of Article 16 of this Agreement;
- 17.2.11 fails, or Franchisee's legal representative fails, to transfer the interests in this Franchise Agreement and the Franchised Business upon death or permanent disability of Franchisee or any Principal of Franchisee as required by Section 16.7.
- 17.2.12 has misrepresented or omitted material facts in applying for the Franchise;
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, there are several conditions under which Baya Bar can terminate the franchise agreement immediately without offering an opportunity to cure the default. These include failing to acquire a site, complete construction, obtain necessary licenses, or open the Franchised Business within the specified timeframe outlined in Article 8 of the agreement.
Other conditions that allow for immediate termination include falsifying reports to Baya Bar, ceasing operation of the Franchised Business for five or more days (unless due to casualty and relocation efforts), losing possession of the property where the business is located (again, with exceptions for casualty and relocation efforts), failing to restore the business to full operation within a reasonable timeframe (typically 120 days) after a casualty, and failing to comply with any applicable federal, state, or local laws, rules, or regulations, including tax obligations.
Additionally, Baya Bar can terminate the agreement without an opportunity to cure if the franchisee has received at least two default notices within a twelve-month period, regardless of whether those defaults were corrected. Further non-curable defaults include having insufficient funds to honor a check or electronic funds transfer two or more times within any consecutive twelve-month period, defaulting under any other agreement with Baya Bar or its affiliates, or terminating the franchise agreement without cause.
These stipulations are important for prospective franchisees to consider, as they highlight situations where the franchise agreement can be terminated swiftly, potentially leading to significant financial and operational disruptions. Franchisees should be aware of these potential pitfalls and ensure they maintain compliance with all contractual obligations and legal requirements to avoid such terminations.