Under the Belocal franchise agreement, does the termination clause apply if a principal of the franchisee pleads nolo contendere to an indictable offense?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
- (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, the franchise agreement can be terminated immediately if a principal pleads nolo contendere to an indictable offense. Specifically, Belocal can terminate the agreement with written notice and without an opportunity to cure the issue.
This provision means that if a principal of the Belocal franchise is charged with an indictable offense and pleads nolo contendere (no contest), Belocal has the right to terminate the franchise agreement immediately. This is a significant risk for franchisees, as it means that their investment in the franchise could be lost due to the actions of a principal, even if those actions are not directly related to the operation of the franchise.
It is important for prospective Belocal franchisees to carefully consider this termination clause and understand the potential implications. They should also ensure that all principals of the franchise are aware of this provision and the potential consequences of their actions. This type of clause is not uncommon in franchise agreements, as franchisors want to protect their brand and reputation from any negative impact due to the actions of franchisees or their principals.