What constitutes 'routine litigation incidental to the business' that Belocal considers acceptable?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
- The following is to be added at the end of Item 3:
Except as provided above, the following applies to the franchisor, its predecessor, a person identified in Item 2, or an affiliate offering franchises under the franchisor's principal trademark:
- A. No such party has an administrative, criminal, or civil action pending against that person alleging: a felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or misdemeanor allegations.
- B. No such party has pending actions other than routine litigation incidental to the business that is significant in the context of the number of franchisees and the size, nature, or financial condition of the franchise system or its business operations.
- C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the ten years immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.
- D. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the franchise or under a Federal, State, or Canadian franchise, securities, antitrust, trade regulation, or trade practice law resulting from a concluded or pending action or proceeding brought by a public agency; or is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities and Exchange Act of 1934, suspending or expelling such person from membership in such association or exchange; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the franchisor can have pending actions as long as they are considered 'routine litigation incidental to the business.' This is deemed acceptable if it is not significant when considering the number of franchisees, the size, nature, or financial condition of the Belocal franchise system and its business operations.
This statement implies that Belocal may be involved in lawsuits that are considered a normal part of doing business. However, these lawsuits should not be substantial enough to negatively impact the franchisees or the financial stability of the Belocal system. This could include disputes with advertisers, vendors, or other common business-related legal matters.
For a prospective franchisee, this means it's important to understand the nature and frequency of these 'routine' lawsuits. While some level of litigation is normal, a high volume or significant financial exposure could be a red flag. A potential franchisee should inquire about the types of legal issues Belocal has faced, how they were resolved, and what the potential financial impact of ongoing or future litigation might be. This information can help assess the overall risk of investing in a Belocal franchise.