What happens if a Beard Papas franchisee is in default of the Multi-Unit Development Agreement?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
OTHER AUTHORIZED DEVELOPMENT RESTAURANTS: Provided that Franchisee is not in default of the terms of this Beard Papa's Multi-Unit Development Agreement (including but not limited to the Development Schedule set forth below) and that neither Franchisee nor Franchisee's affiliates are in default of any Franchise Agreement or other agreement with Franchisor, the Development Shop Initial Franchise Fee for each additional
Development Shop Initial Franchise Fee for Other Development Shops
Development Shop (over and above the First Development Shop), is: $0 (waived) payable at the time of signing the Franchise Agreement for each Development Shop.
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.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to the 2025 Beard Papas FDD, if a franchisee defaults on the Multi-Unit Development Agreement, they may not be eligible for a waiver of the Development Shop Initial Franchise Fee for additional locations. Specifically, the waiver of $0 for each additional Development Shop is contingent on the franchisee remaining in good standing with the agreement. This includes adhering to the Development Schedule and ensuring that neither the franchisee nor their affiliates are in default of any other agreements with Beard Papas.
This conditionality means that a franchisee's failure to meet the obligations outlined in the Multi-Unit Development Agreement can have direct financial consequences. Instead of the waived fee, the franchisee would have to pay the initial franchise fee for each additional shop. The FDD does not specify the amount of the initial franchise fee, but it does state that the initial franchise fee for the first development shop is $45,000.
Furthermore, Beard Papas has the right to terminate the Multi-Unit Development Agreement if the franchisee abandons their obligations, fails to meet development obligations under the Development Schedule, or becomes insolvent. Termination can also occur if any single Franchise Agreement is terminated for any Development Shop or any other Franchise Agreement between Beard Papas and the franchisee. This termination can be enacted without providing an opportunity to cure the default.
In essence, maintaining compliance with the Multi-Unit Development Agreement is crucial for Beard Papas franchisees to avoid financial penalties and potential termination of their development rights. The Development Schedule, adherence to other agreements, and overall financial stability are key factors in remaining in good standing with Beard Papas.