Under the Belocal franchise agreement, what is the consequence if a principal of the franchisee is convicted of a felony?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
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- (7) Whether before or after the Effective Date, Franchisee or any Principal has been or is charged with, convicted of, or pleads nolo contendere to, a felony or indictable offense in any court, is subject to a judgment, default, lien, bankruptcy, or similar occurrence, becomes known to Communities, Industry Groups, or advertisers as being of bad moral character, disparages, embarrasses, or tarnishes Franchisor's reputation, or fails to comport itself at all times in accordance with the highest standards of conduct and behavior, consistent with its responsibilities as a franchisee;
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, if a principal of a Belocal franchise is convicted of a felony, Belocal has the right to terminate the franchise agreement immediately without providing an opportunity to cure the issue. This is a significant consequence, as it means the franchisee could lose their franchise and business investment due to the actions of a principal. The felony conviction does not need to be related to the Belocal business to trigger termination.
This provision underscores the importance Belocal places on the character and legal standing of its franchisees and their principals. The term "principal" is defined in the franchise agreement and typically includes owners, officers, and directors of the franchisee entity. This requirement extends beyond just a conviction; even being charged with a felony or pleading nolo contendere (no contest) to a felony charge can trigger termination, regardless of when the event occurred.
Prospective Belocal franchisees should carefully consider this clause and ensure that all principals associated with their franchise meet Belocal's standards. It is crucial to conduct thorough background checks on all principals and to maintain a high standard of conduct to avoid any actions that could jeopardize the franchise agreement. Franchisees should also understand their rights and obligations under the agreement and seek legal counsel if they have any concerns about this provision.