Does the Beard Papas Multi-Unit Development Agreement specify any requirements for the franchisor to terminate the agreement with cause?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
u should read these provisions in the agreements attached to this Disclosure Document.**
| Provision | Sections in Multi-Unit Development Agreement | Summary | |
|---|---|---|---|
| a. | Length of the franchise term | 3 | Varies depending on the number of Shops to be developed and the Development Area. The agreement commences on the effective date and the term automatically expires at the earlier of the opening of the final Shop required for development, or the last day of the calendar month in which the final Shop was required to be open under the Multi-Unit Development Agreement. |
| b. | Renewal or extension of the | Not | There is no renewal of the Multi-Unit Development |
| term | applicable | Agreement. | |
| c. | Requirements for franchisee | Not | There is no renewal of the Multi-Unit Development |
| to renew or extend | applicable | Agreement. | |
| d. | Termination by franchisee | Not applicable | There is no option for your termination of the Multi-Unit Development Agreement. Subject to state law. |
| e. | Termination by franchisor | Not | We can terminate without cause only if you and we |
| without cause | applicable | mutually agree, in writing, to terminate. | |
| f. | Termination by franchisor with "cause" | 3.2 | We may terminate your Multi-Unit Development Agreement with cause. Your Multi-Unit Development Agreement can be terminated by us if: (a) you abandon your obligations under the Multi-Unit Development Agreement; (b) if you for four consecutive months, or any shorter period that indicates an intent by you to discontinue your development of Shops within the Development Area; (c) if you become insolvent or you are adjudicated bankrupt, or if any action is taken by you, or by others against you, under any insolvency, bankruptcy or reorganization act, or if you make an assignment for the benefit or creditors or a receiver is appointed by you; (d) |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 43–51)
What This Means (2025 FDD)
According to Beard Papas's 2025 Franchise Disclosure Document, the franchisor can terminate the Multi-Unit Development Agreement with cause under certain conditions, as detailed in section 3.2 of the agreement. These conditions include if the franchisee abandons their obligations under the agreement, discontinues development of shops within the Development Area for four consecutive months (or a shorter period indicating intent to discontinue), becomes insolvent or bankrupt, makes an assignment for the benefit of creditors, or fails to meet development obligations under the Development Schedule. Additionally, Beard Papas can terminate the agreement if any single Franchise Agreement is terminated respecting any shop or any other Franchise Agreement with them.
These termination conditions are significant for prospective multi-unit developers as they outline the specific circumstances under which Beard Papas can end the development agreement. Failing to meet development schedules or experiencing financial instability can lead to termination. The clause regarding the termination of a single Franchise Agreement also creates a potential risk, as issues with one shop could jeopardize the entire multi-unit development agreement.
It is important to note that the FDD also states that there is no option for the franchisee to terminate the Multi-Unit Development Agreement. Furthermore, Beard Papas can only terminate the agreement without cause if both parties mutually agree in writing. This asymmetry in termination rights favors the franchisor, placing the onus on the franchisee to adhere strictly to the development schedule and maintain financial stability to avoid potential termination.
Prospective franchisees should carefully review Section 3.2 of the Multi-Unit Development Agreement to fully understand their obligations and the potential consequences of failing to meet them. Understanding these termination conditions is crucial for assessing the risks and rewards associated with entering into a multi-unit development agreement with Beard Papas.