Is a Belocal franchisee required to continue operating the franchised business until the effective date of termination?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
. For the avoidance of doubt, Franchisee has an obligation to continue to operate the Franchised Business until the effective date of termination. If Franchisee abandons the Franchised Business prior to the effective date of termination established by Franchisor 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 shall have the right to immediately terminate this Agreement and 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.
- G. Step-In Rights. In addition to Franchisor's right to terminate this Agreement, and not in lieu of such right, or any other rights Franchisor may have against Franchisee, upon a failure by Franchisee or any Principal to comply with any of the requirements of this Agreement, or upon a failure to cure any default within the applicable time period (if any), Franchisor shall have the right, but not the obligation, to assume management of the Franchised Business (or appoint a party to assume its management) until such time as Franchisor determines that the default has been cured and Fr
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 effective date of termination. If a franchisee abandons the business before this date or fails to follow the wind-down procedures outlined in the Franchise Brand Standards Manual, they will be in default of the Franchise Agreement. This gives Belocal the right to immediately terminate the agreement and charge "Wind-Down Damages" to cover losses incurred during the premature closure. The franchisee is also responsible for covering all costs, expenses, and attorneys' fees that Belocal incurs while enforcing this provision.
This requirement ensures that Belocal maintains consistent service and brand representation up to the agreed-upon termination date. Abandoning the business early can disrupt services and negatively impact Belocal's reputation. The wind-down procedures likely involve orderly transfer of customer relationships, ceasing use of Belocal's branding, and fulfilling any outstanding obligations.
The "Wind-Down Damages" are specified as the greater of six months' worth of the average Royalty the franchisee paid for the prior 12 months or $2,500. This amount is intended to compensate Belocal for the losses incurred due to the franchisee's failure to properly wind down the business. Belocal has the right to deduct or withhold any Wind-Down Damages from Franchisee's Commissions or transfer the Wind-Down Damages by EFT from Franchisee to Franchisor.
This clause is fairly standard in franchise agreements, as franchisors need to protect their brand and ensure a smooth transition during terminations. Prospective Belocal franchisees should carefully review the Franchise Brand Standards Manual to understand the specific wind-down procedures and ensure they are prepared to fulfill these obligations if they decide to terminate their agreement.