How do the lease agreements impact Beard Papas' financial obligations?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
nt of Franchisor. Without limitation to the foregoing, among other things, Tenant agrees that if Tenant wishes to transfer any interests in the Lease or the Leased Premises that Tenant must request the written
consent of Franchisor. If Tenant requests Landlord's consent to Tenant's amendment, transfer and/or assignment of Tenant's interests in the Lease and/or the Leased Premises and if Landlord is inclined to approve of such amendment, transfer and/or assignment that Landlord shall condition Landlord's approval upon Tenant also obtaining written consent from Franchisor.
- Upon the occurrence of (a) the termination, for any reason, of the Franchise Agreement; (b) the expiration, without renewal, of the Franchise Agreement; (c) Franchisor's exercise of Franchisor's Right of First Refusal granted to Franchisor in the Franchise Agreement; (d) Tenant's default under the terms of the Lease; and/or (e) Tenant's failure to exercise an option period under the terms of the Lease, Tenant and Landlord acknowledge and agree, that:
Franchisor will have the option, but not the obligation, to assume or renew the Lease and the occupancy of the Leased Premises, including the right to sublease to another Franchisee of the Beard Papa's Franchise System, for all or any part of the remaining term of the Lease and, in connection with said assumption, Franchisor will not be obligated to pay to Landlord more than two months past due rent, real estate taxes and common area maintenance charges. In the event Franchisor assumes Tenant's leasehold interest in the Lease pursuant to the terms of this Agreement and subsequently assigns the Lease and its leasehold interest to a Beard Papa's franchisee approved by Landlord, Franchisor shall not be responsible for any obligations, debts, liabilities or payments arising and/or accruing under the Lease after the effective date of such assignment. Landlord agrees that any assignment of the Lease and Tenant's leasehold interests in the Lease by Tenant to Franchisor and/or assumption by Franchisor of the Lease and such leasehold interests shall not require Landlord consent and shall not require any payment of any assignment fee or similar charge or result in any increase in rent or other fees as a result of such assignment and/or assumption.
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- Landlord must provide Franchisor, at the same time that Landlord provides Tenant, with a copy of all lease amendments and assignments, and a copy of all letters and notices that Landlord sends to Tenant relating to the Lease or the Premises. Subject to the rights set forth in Section "3" of this Rider, Landlord agrees to notify Franchisor by nationally recognized overnight courier at the Notice Address of any default by Tenant under the Lease.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to the 2025 Beard Papas FDD, the lease agreements have several potential impacts on Beard Papas' financial obligations. Beard Papas has the option to assume or renew a franchisee's lease under certain conditions, such as termination or expiration of the Franchise Agreement, franchisee default, or failure to exercise an option period. If Beard Papas chooses to assume the lease, they are only obligated to pay up to two months of past due rent, real estate taxes, and common area maintenance charges. This provides a limited and defined financial risk to Beard Papas in such situations.
Furthermore, if Beard Papas assumes a lease and subsequently assigns it to another approved franchisee, Beard Papas is not responsible for any obligations, debts, liabilities, or payments arising after the assignment date. The lease agreements also stipulate that assignments or assumptions by Beard Papas do not require landlord consent, assignment fees, or rent increases. This protects Beard Papas from unexpected costs or liabilities when taking over and reassigning leases.
Beard Papas' financial obligations are also affected by the franchisee's responsibility for site selection. The franchisee is solely responsible for selecting the site and must obtain Beard Papas' written approval. The franchisee must also use an experienced commercial real estate broker. Beard Papas does not have an obligation to assist in site selection or lease negotiation. This arrangement limits Beard Papas' direct financial involvement in securing locations, as the franchisee bears the primary responsibility and associated costs.
Finally, for the years ended December 31, 2023 and 2022, the company incurred rent expenses under noncancelable lease agreements of approximately $168,000 and $70,000, respectively. This indicates the brand's existing financial commitments related to leases, providing a historical perspective on these expenses.