What are the potential consequences if a Belocal franchisee fails to comply with the mutual termination and release agreement?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee fails to comply with the terms of the mutual termination and release agreement, abandons the Franchised Business prior to the date of mutual termination, or fails to comply with the winddown procedures in the Franchise Brand Standards Manual, Franchisor may charge the Wind-Down Damages defined in Section 10.J. below.
Therefore, Franchisee and Franchisor agree that a reasonable estimate of those damages (as liquidated damages and not as a penalty) is an amount equal to the greater of six months' worth of the average Royalty Franchisee paid for the prior 12 months or $2,500 ("Wind-Down Damages").
Franchisor shall have 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.
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.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, if a franchisee fails to comply with the terms of the mutual termination and release agreement, abandons the franchised business before the agreed termination date, or does not follow the wind-down procedures outlined in the Franchise Brand Standards Manual, Belocal may charge the franchisee Wind-Down Damages.
The Wind-Down Damages are defined as the greater of six months' worth of the average Royalty the franchisee paid for 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) from the franchisee to Belocal.
Furthermore, the franchisee is obligated to continue operating the Belocal franchised business until the effective date of termination. Failure to do so will result in the franchisee being in default of the agreement, which allows Belocal to immediately terminate the agreement and charge the Wind-Down Damages. The franchisee is also responsible for paying all costs, expenses, and attorneys' fees incurred by Belocal in enforcing these terms and conditions. Belocal retains the right to pursue any other available remedies for a breach of the franchise agreement.