Under what circumstances does a Belocal franchisee incur costs and expenses related to a security breach?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee (1) | Amount | Due Date | Remarks |
|---|---|---|---|
| Management Fee | 45% of monthly Cash Received, plus any expenses we incur in managing the Franchised Business | Monthly | Only payable in the event we must operate your franchise due to death, disability, defaults etc. The Management Fee is in addition to other fees due to us. |
| Customer Complaint Fee | Our costs and expenses associated with our response to and any resolution of a complaint | On demand | If an advertiser, client, or third party complains to us and you fail to satisfactorily remedy the complaint, you will pay us our costs and expenses associated with our response to and any resolution of the complaint. |
| Wind-Down Damages | An amount equal to the greater of (a) 6 months’ worth of the average Royalty you paid for the 12 months prior to the default or (b) $2,500 | On demand | Only payable if you fail to comply with the wind-down procedures or abandon the Franchised Business. |
| Transfer Damages | Greater of 15% of transfer price or $25,000 | Within 15 days of our demand | You will pay these transfer damages if you do not comply with the transfer terms under the Franchise Agreement. |
Source: Item 6 — OTHER FEES (FDD pages 14–31)
What This Means (2025 FDD)
Based on the 2025 Belocal Franchise Disclosure Document excerpts provided, there is no explicit mention of costs or expenses a franchisee might incur related to a security breach. The document details various fees such as Management Fees (45% of monthly Cash Received plus expenses if Belocal operates the franchise), Customer Complaint Fees (costs and expenses for resolving complaints), Wind-Down Damages (equal to 6 months of average Royalty or $2,500), and Transfer Damages (greater of 15% of transfer price or $25,000). However, none of these fees directly address security breaches.
Item 6 outlines various fees a Belocal franchisee may encounter, including those related to management, customer complaints, and failure to comply with wind-down or transfer procedures. The absence of specific fees related to security breaches suggests that either such costs are covered under a different, more general clause, or that the franchisee may not be directly responsible for these costs. It is important to note that the franchisor retains the right to adjust fees based on market conditions, cost of services, and policy changes.
A prospective Belocal franchisee should seek clarification from the franchisor regarding liability and financial responsibility in the event of a security breach. Specifically, they should inquire whether there are any implicit or explicit obligations for franchisees to cover costs associated with data breaches, security incidents, or related issues. Understanding these potential liabilities is crucial for assessing the overall financial risk of investing in a Belocal franchise.
To gain a comprehensive understanding of potential costs related to security breaches, a prospective franchisee should ask Belocal for specific details on: (1) What security measures are franchisees required to implement? (2) What insurance coverage is required to protect against losses from security breaches? (3) Under what specific circumstances would a franchisee be financially responsible for costs resulting from a security breach? and (4) Are there any existing or planned policies regarding data breach response and cost allocation between the franchisor and franchisees?