Under the Belocal franchise agreement, what is the consequence if a Belocal franchisee abandons the franchised business?
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 Franchisee is otherwise in compliance with this Agreement, or until Franchisor determines it will no longer exercise its step-in right. The terms and conditions for the exercise of Franchisor's step-in right are set forth in Section 12.E.
- H. Limitation of Services or Benefits.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, if a franchisee abandons the franchised business before the termination date set by Belocal or does not follow the wind-down procedures in the Franchise Brand Standards Manual, they will be in default of the Franchise Agreement. This abandonment gives Belocal the right to immediately terminate the agreement.
In addition to immediate termination, Belocal can charge the franchisee "Wind-Down Damages." These 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 can deduct or withhold these Wind-Down Damages from any commissions owed to the franchisee or transfer the damages via EFT from the franchisee to Belocal.
Furthermore, the franchisee is responsible for covering all costs, expenses, and attorneys' fees that Belocal incurs while enforcing the terms and conditions related to the abandonment. It is important to note that Belocal retains the right to pursue any other available remedies for the breach, in addition to the specific actions mentioned above. Belocal also has the right to assume management of the Franchised Business if the franchisee fails to comply with the agreement.