If Better Blend binds a holdover franchisee to a renewal term, what fee is collected?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.11 Holdover. If Franchisee continues operating the Business after the expiration of the term without a renewal agreement or successor franchise agreement executed by the parties in accordance with Section 3.2, then at any time (regardless of any course of dealing by the parties), BBF may by giving written notice to Franchisee (the "Holdover Notice") either (i) require Franchisee to cease operating the Business and comply with all post-closing obligations effective immediately upon giving notice or effective on such other date as BBF specifies, or (ii) bind Franchisee to a renewal term of five years, collect the renewal fee this Agreement specified in Section 3.2(v), and deem Franchisee and its Owners to have made the general release of liability described in Section 3.2(vi).
Source: Item 22 — CONTRACTS (FDD page 43)
What This Means (2024 FDD)
According to Better Blend's 2024 Franchise Disclosure Document, if a franchisee continues to operate the business after the franchise term expires without a renewal agreement, Better Blend has the option to bind the franchisee to a renewal term of five years. If Better Blend exercises this option, it will collect the renewal fee specified in Section 3.2(v) of the Franchise Agreement. Additionally, the franchisee and its owners will be deemed to have made the general release of liability described in Section 3.2(vi).
This holdover clause gives Better Blend significant leverage over franchisees whose agreements have expired but continue to operate. By invoking this clause, Better Blend can force a renewal on its terms, ensuring continued operation under the brand and receipt of the renewal fee. This could be a considerable risk for franchisees who may be in the process of negotiating different terms or considering exiting the business.
It is important for prospective Better Blend franchisees to understand the implications of this holdover clause. They should carefully review Section 3.2(v) to determine the exact amount of the renewal fee and Section 3.2(vi) to understand the scope of the general release of liability. Franchisees should also be aware of the conditions under which Better Blend might exercise this option and the potential consequences for their business and personal liability.