Is a Belocal franchisee obligated to continue operating the Franchised Business until the closing of a transfer or the expiration date?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
N
- A. Prior to the closing of a transfer of the Franchised Business or expiration of this Agreement, Franchisee shall comply with Franchisor's instructions regarding the wind-down of Franchisee's operations, comply with the wind-down procedures in the Franchise Brand Standards Manual, and cooperate in good faith with Franchisor, its affiliates, and their representatives during the wind-down period, including meeting digitally or in-person if requested. For the avoidance of doubt, Franchisee has an obligation to continue to operate the Franchised Business until the closing of the transfer or the expiration date. If Franchisee abandons the Franchised Business prior to the closing of the transfer or the expiration date or fails to comply with the wind-down procedures in the Franchise Brand Standards Manual, Franchisee shall be in default under this Agreement and Franchisor may charge the Wind-Down Damages. Franchisee shall pay all costs, expenses and attorneys' fees incurred by Franchisor in enforcing the terms and conditions of this provision. Nothing contained herein shall be construed as prohibiting Franchisor from additionally pursuing any other remedies which may be available to Franchisor for a breach.
- B. Upon the expiration or termination of this Agreement (including termination following transfer, if applicable), all rights granted to Franchisee hereunder shall immediately terminate, and Franchisee and its Principals must:
- (1) Immediately cease to conduct operations of the Franchised Business and cease holding themselves out as a franchisee (or a principal of a franchisee) of Franchisor (except for purposes of disclosing past experience on a resume);
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, a franchisee is obligated to continue operating the franchised business until the closing of a transfer or the expiration date of the franchise agreement. If a franchisee abandons the business before either of these events, it is considered a default under the agreement. Belocal can then charge "Wind-Down Damages."
Specifically, Belocal can charge Wind-Down Damages if the franchisee abandons the business or fails to comply with wind-down procedures outlined in the Franchise Brand Standards Manual. These damages are a reasonable estimate of losses suffered by Belocal, and are calculated as the greater of six months' worth of the average royalty paid by the franchisee over the prior 12 months or $2,500.
Belocal has the right to deduct or withhold these Wind-Down Damages from any commissions owed to the franchisee or transfer the damages via EFT (electronic funds transfer). The franchisee is also responsible for covering all costs, expenses, and attorneys' fees that Belocal incurs while enforcing these terms. However, Belocal retains the right to pursue any other available remedies for a breach of contract, in addition to collecting Wind-Down Damages.
This clause ensures business continuity and protects Belocal's interests by preventing franchisees from abruptly ceasing operations, which could negatively impact the brand's reputation and revenue. Prospective franchisees should carefully review the wind-down procedures in the Franchise Brand Standards Manual to understand their obligations and avoid potential penalties.