Does Better Blend consider routine litigation incidental to the business as a 'pending action' requiring disclosure?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
- The following is added at the end of Item 3:
Except as provided above, with regard to the franchisor, its predecessor, a person identified in Item 2, or an affiliate offering franchises under the franchisor's principal trademark:
- A. No such party has an administrative, criminal or civil action pending against that person alleging: a felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or misdemeanor allegations.
- B. No such party has pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the franchise system or its business operations.
- C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10 year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.
- D. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a Federal, State, or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending
Source: Item 23 — RECEIPTS (FDD pages 43–157)
What This Means (2024 FDD)
According to Better Blend's 2024 Franchise Disclosure Document, the company does not consider routine litigation incidental to the business as a 'pending action' requiring disclosure. Better Blend is not required to disclose pending actions if they are considered routine litigation incidental to the business, and are not significant in the context of the number of franchisees, the size, nature, or financial condition of the franchise system or its business operations.
This means that Better Blend is only obligated to disclose administrative, criminal, or civil actions pending against them alleging a felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or misdemeanor allegations. This also applies to convictions of a felony or pleading nolo contendere to a felony charge, or within the 10 year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.
For a prospective franchisee, this means that Better Blend is not obligated to disclose every single legal action they are involved in, only those that meet the criteria outlined in the FDD. This is a fairly standard practice in franchising, as it would be impractical and potentially misleading to disclose every minor legal issue a large franchise system might face. However, it is important for potential franchisees to understand the types of legal issues that Better Blend is required to disclose, as these could be indicators of potential risks or problems with the franchise system.