What specific actions constitute termination of a Beard Papas franchisee's leasehold interests that would trigger automatic termination?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to the 2025 Beard Papas Franchise Disclosure Document, the termination of a franchisee's leasehold interests, which allows Beard Papas to assume or renew the lease, occurs under specific conditions. These conditions include the termination of the Franchise Agreement for any reason, the expiration of the Franchise Agreement without renewal, or Beard Papas's exercise of their Right of First Refusal. Additionally, a franchisee's default under the terms of the lease or failure to exercise an option period under the lease also triggers this termination.
This provision is significant for prospective Beard Papas franchisees as it outlines the circumstances under which they could lose control of their leased premises. If any of these events occur, Beard Papas has the option to step in and take over the lease, potentially subleasing it to another franchisee. This clause protects Beard Papas's interests by ensuring continuity of the business at the location, but it also means a franchisee could lose their location due to various factors, including not renewing their franchise agreement or failing to meet lease obligations.
Furthermore, the FDD states that if Beard Papas assumes the lease and subsequently assigns it to another approved franchisee, Beard Papas will not be responsible for any obligations arising after the assignment date. The landlord is also required to allow the assignment or assumption of the lease by Beard Papas without consent, assignment fees, or rent increases. This arrangement facilitates a smooth transition of the lease to Beard Papas or another franchisee, but it underscores the original franchisee's vulnerability to losing their leasehold interest under the specified conditions.