Does Belocal have a 'step-in right' upon a franchisee's default, and if so, under what circumstances?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Franchise Agreement | Summary |
|---|---|---|
| manipulates, corrupts, or improperly modifies the IT Systems or any data stored therein; or (iv) transfers, copies, or discloses any data from the IT Systems except as expressly permitted under the Franchise Agreement; other defaults that are incapable of being cured. A provision in the Franchise Agreement which terminates the Franchise Agreement upon your bankruptcy may not be enforceable under Title 11, United States Code Section 101. Franchisor has a step-in right upon default. | ||
| g. "Cause" defined - curable defaults | Section 10.D. | If you do not cure the following defaults within the cure periods we establish, we will have the right to terminate: failure to meet content, review, approval, processing, and other publication deadlines; failure to operate the Franchised Business in accordance with our standards; failure to maintain content that satisfies our standards; failure to timely submit content or failure to submit sufficient content; failure to return any Returnable Commissions due to us; failure to pay any fee or amount when due to a supplier or creditor; failure to pay your independent staff in accordance with law; failure to interact professionally with clients and leads of Hyport Digital or failure to comply with policy and requirements for Hyport Digital leads, clients, goods, services, and trademarks; failure to interact professionally with other franchisees, advertisers, clients, or members of Communities or Industry Groups; other non compliance; repeated complaints about the Franchised Business, Franchisee, or any Principal. Franchisor has a step-in right upon default. |
| h. "Cause" defined – non-curable defaults | Sections 10.B. and 10.C. | Insolvency; general assignment for benefit of creditors; filing of voluntary bankruptcy; filing of involuntary bankruptcy not dismissed within 60 days; admission of inability to pay debts; adjudicated bankrupt or insolvent; receivership; final judgment remains unsatisfied for 30 days or more; dissolution; execution of levy or sale after levy; abandonment or cessation of Franchised Business; unauthorized transfer; failure to comply with restrictions on use of Copyrighted Materials and confidential information; failure to comply with covenants; misuse of the Systems or Marks; material misrepresentations or breaches of representations and warranties; whether before or after the date of the Franchise Agreement, you or a Principal has |
| p. Death or disability of franchisee | Section 9.E. | If the Franchisee or a Principal dies or is disabled, the interest of such Franchisee or Principal must be transferred within six months. Franchisor has a step-in right upon death or disability. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION THE FRANCHISE RELATIONSHIP (FDD pages 49–55)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, Belocal retains a "step-in right" under certain circumstances. Specifically, Belocal has a step-in right upon a franchisee's default. Additionally, Belocal has a step-in right upon the death or disability of the franchisee or a principal.
The FDD specifies several events that constitute default, some of which are curable and others not. Curable defaults include failing to meet deadlines, operate according to Belocal's standards, maintain content standards, submit content timely, return commissions, pay suppliers, pay staff legally, or interact professionally with clients, leads, franchisees, or community members. Non-curable defaults include insolvency, assignment for creditors, bankruptcy, inability to pay debts, receivership, unsatisfied judgments, dissolution, abandonment, unauthorized transfer, misuse of copyrighted material, misrepresentations, or data manipulation.
Belocal's step-in right allows them to assume control of the franchise operations in the event of franchisee default, death, or disability. This provision protects Belocal's brand and ensures continuity of operations. For a prospective franchisee, this means that Belocal can take over the business if the franchisee fails to meet the obligations outlined in the franchise agreement or encounters unforeseen circumstances like death or disability. It is important for a prospective franchisee to understand the specific conditions that trigger Belocal's step-in rights and the implications for their business.