What constitutes a cross-default under the Beef O Bradys franchise agreement?
Beef_O_Bradys Franchise · 2025 FDDAnswer from 2025 FDD Document
- 9.2 Cross-Default.
Any default or breach by you, your affiliates and/or any guarantor of yours of any other agreement between us or our affiliates and you and/or such other parties will be deemed a default under this Agreement, and any default or breach of this Agreement by you and/or such other parties will be deemed a default or breach under any and all such other agreements between us or our affiliates and you, your Affiliates and/or any guarantor of yours.
If the nature of the default under any other agreement would have permitted us (or our affiliate) to terminate this Agreement if the default had occurred under this Agreement, then we will have the right to terminate all such other agreements in the same manner provided for in this Agreement for termination hereof.
Source: Item 23 — RECEIPTS. (FDD pages 66–330)
What This Means (2025 FDD)
According to Beef O Bradys's 2025 Franchise Disclosure Document, a cross-default occurs when a franchisee, their affiliates, or any guarantor breaches any agreement with Beef O Bradys or its affiliates. This breach is then considered a default under the franchise agreement itself. Conversely, any default or breach of the franchise agreement by the franchisee also constitutes a default or breach under any other agreements between the franchisee and Beef O Bradys. This means that if a franchisee has multiple agreements with Beef O Bradys, a default in one agreement can trigger defaults in all other agreements.
This cross-default provision has significant implications for a prospective Beef O Bradys franchisee. It creates a situation where a relatively minor infraction under one agreement, such as a loan agreement or a supply contract, could lead to the termination of the entire franchise agreement. This interconnectedness increases the risk for franchisees, as it broadens the scope of potential defaults and their consequences. Franchisees need to be diligent in complying with all agreements they have with Beef O Bradys to avoid triggering the cross-default clause.
Furthermore, the FDD states that if a default under any other agreement would have allowed Beef O Bradys to terminate the franchise agreement had the default occurred directly under the franchise agreement, then Beef O Bradys has the right to terminate all other agreements as well. This provision grants Beef O Bradys considerable power, allowing them to terminate multiple agreements based on a single, potentially minor, default. Prospective franchisees should carefully review all agreements with Beef O Bradys and understand the potential ramifications of this cross-default provision before signing the franchise agreement.