What are the consequences if a Beard Papas franchisee defaults on the Multi-Unit Development Agreement?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
3.2 TERMINATION BY FRANCHISOR
Franchisor possesses the right, at Franchisor's option, to terminate this Agreement and all rights granted to Franchisee hereunder, without affording Franchisee with any opportunity to cure such default, effective upon written notice to Franchisee, or automatically upon the occurrence of any of the following events: (a) if Franchisee Abandons Franchisee's obligations under this Agreement; (b) if Franchisee for four consecutive months, or any shorter period that indicates an intent by Franchisee to discontinue Franchisee's development of Shops within the Development Area; (c) if Franchisee becomes insolvent or is adjudicated bankrupt, or if any action is taken by Franchisee, or by others against the Franchisee, under any insolvency, bankruptcy or reorganization act, or if Franchisee makes an assignment for the benefit or creditors or a receiver is appointed by the Franchisee; (d) if Franchisee fails to meet its development obligations under the Development Schedule for any single Development Period including, but not limited to, Franchisee's failure to establish, open and/or maintain the cumulative number of Beard Papa's Shops in accordance with Development Schedule; and/or (e) in the event that any one Franchise Agreement is terminated respecting any Development Shop and/or any other Franchise Agreement between Franchisor and Franchisee.
SECTION 4 DEVELOPMENT AREA FEE, INITIAL FEES AND DEVELOPMENT SCHEDULE
4.1 DEVELOPMENT AREA FEE
In exchange for the rights set forth and granted pursuant to the terms of this Agreement, upon execution of this Agreement, Franchisee shall pay to Franchisor a development area fee (the "Development Area Fee"). The Development Area Fee is not refundable under any circumstance.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to the 2025 Beard Papas Franchise Disclosure Document, if a franchisee defaults on the Multi-Unit Development Agreement, Beard Papas has the right to terminate the agreement. This termination can occur without providing the franchisee an opportunity to correct the default, and it becomes effective immediately upon written notice.
Several specific events can trigger this termination. These include the franchisee abandoning their obligations under the agreement, discontinuing development of shops within the designated area for four consecutive months (or a shorter period indicating intent to discontinue), or becoming insolvent or bankrupt. Termination can also occur if the franchisee fails to meet the development obligations outlined in the Development Schedule, such as failing to establish, open, or maintain the required number of Beard Papas shops. Additionally, if any individual Franchise Agreement for a Development Shop is terminated, the Multi-Unit Development Agreement can also be terminated.
Beyond the termination of the agreement, a franchisee should also be aware that the Development Area Fee paid to Beard Papas is non-refundable under any circumstances. This means that if the agreement is terminated due to default, the franchisee will not be able to recover this initial investment. Furthermore, if Beard Papas prevails in any arbitration or litigation regarding the franchisee's breach, the franchisee will be responsible for covering all of Beard Papas's associated attorney fees, costs, and expenses.