What is the significance of Article 16.A.(3) in relation to the termination of a Bee Organized franchise agreement?
Bee_Organized Franchise · 2025 FDDAnswer from 2025 FDD Document
The foregoing events of default set forth in this Article 16.A.(3) shall exclude events of default that are otherwise governed by and/or constitute events of default under Article 16.A.(1) or Article 16.A.(2). In the event of any inconsistency or conflict between the provisions of this Article 16.A.(3) with Article 16.A.(1), Article 16.A.(1) shall take precedence and govern. In the event of any inconsistency or conflict between the provisions of this Article 16.A.(3) with Article 16.A.(2), Article 16.A.(2) shall take precedence and govern.
(4) Defaults and Automatic Termination After 30 Day Cure Period Franchisee shall be in default of this Agreement and, this Agreement shall be terminated, upon the occurrence of any one or more of the following actions, inactions, omissions, events, and/or circumstances, unless, Franchisee timely cures, to the satisfaction of Franchisor, such default/action, inaction, omission, event, and/or circumstance within 30 calendar days of Franchisor's written notice:
(a) Franchisee fails or refuses to comply with and/or breaches any term, condition, provision, and/or requirement of this Agreement that is not otherwise a default under Articles 16.A.(1), 16.A.(2), or 16.A.(3) of this Agreement;
(b) Franchisee fails or refuses to comply with and/or breaches any term, condition, provision, and/or requirement of any agreement, other than this Agreement, between Franchisor and Franchisee, and/or an affiliate of Franchisor and Franchisee;
(c) Franchisee fails or refuses, in accordance with the terms of this Agreement, to obtain and secure a signed lease agreement or fee simple ownership interest in an approved location for Franchisee's non-residential Administrative Office;
(d) Franchisee fails or refuses to develop and open the Franchised Business on or before the Scheduled Opening Date, in compliance with the terms of this Agreement, as designated or specified in the Operations Manual, and/or in accordance with Franchisor's standards and specifications as communicated to Franchisee from time to time;
Source: Item 23 — RECEIPTS (FDD pages 54–218)
What This Means (2025 FDD)
According to Bee Organized's 2025 Franchise Disclosure Document, Article 16.A.(3) outlines specific defaults that can lead to the termination of the franchise agreement. These defaults are distinct from those listed in Articles 16.A.(1) and 16.A.(2). This means that certain actions or failures on the part of the franchisee, if they fall under the criteria defined in 16.A.(3), can trigger termination proceedings. However, if there are inconsistencies between 16.A.(3) and 16.A.(1) or 16.A.(2), the latter two articles take precedence.
Specifically, if a Bee Organized franchisee engages in actions that constitute a default under Articles 16.A.(3) or 16.A.(4) on three or more occasions, the franchisor has the right to terminate the agreement. This is regardless of whether the franchisee received a notice of default, cured the default in a timely manner, or paid any associated penalties or fees. Additionally, if a franchisee intentionally refuses to comply with the franchise agreement with the intent of harming Bee Organized, the system, other franchisees, or clients, the franchisor can terminate the agreement.
Another cause for termination under Article 16.A.(3) is if the franchisee intentionally or negligently operates the Bee Organized business in violation of laws, rules, or regulations, resulting in a threat to the health or safety of third parties. It's important to note that these defaults under Article 16.A.(3) do not include those already covered under Articles 16.A.(1) or 16.A.(2). This distinction is crucial for a prospective franchisee to understand, as it clarifies the specific types of actions that could lead to termination without the possibility of a cure period.
For a prospective Bee Organized franchisee, understanding the specifics of Article 16.A.(3) is crucial. It highlights the importance of adhering to the terms of the franchise agreement and operating the business in a legal and safe manner. The "three or more instances" clause indicates that repeated minor infractions, even if cured, can accumulate and lead to termination. The intentional harm and negligence clauses underscore the need for franchisees to act responsibly and avoid actions that could damage the brand or endanger others. Franchisees should seek legal counsel to fully understand their obligations and potential risks under this article.