What constitutes a cross default by a Big O Tires Sublessee under the sublease agreement?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
. Cross Default. Default by Sublessee, or any guarantor of Sublessee, under any agreement or instrument between Sublessor and Sublessee, or any guarantor of Sublessee, which permits Sublessor the right to terminate such agreements and/or instruments. Default by Sublessee, or any guarantor of Sublessee, under any agreement or instrument between Sublessor and Sublessee, or any guarantor of Sublessee, which permits Sublessor the right to terminate such agreements and/or instruments;
- 8.1.7. Termination of Franchise Agreement. The termination of Sublessee as a duly authorized franchisee of Sublessor and/or the termination of the Franchise Agreement (defined in Subsection 2.1); and/or
- 8.1.8. Franchise Agreement Default. Sublessee commits any material breach of the Franchise Agreement; Sublessee, or any guarantor of Sublessee, commits any material breach of any other instrument or agreement between Sublessor and Sublessee; and/or Sublessee, or any guarantor of Sublessee, commits any other act or omission to act which permits Sublessor the right to terminate such agreements and/or instruments.
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
According to Big O Tires' 2025 Franchise Disclosure Document, a cross default by a Sublessee occurs under the following conditions: if the Sublessee, or any guarantor of the Sublessee, defaults on any agreement or instrument between the Sublessor and Sublessee (or their guarantors) that grants the Sublessor the right to terminate such agreements or instruments. This means that if the Sublessee fails to meet their obligations under any agreement with the Sublessor, and that failure gives Big O Tires the right to terminate that specific agreement, it will also be considered a default under the sublease agreement.
This provision is significant for a prospective Big O Tires franchisee because it broadens the scope of what constitutes a default. It's not limited to just failing to pay rent or violating the terms of the sublease itself. Any default on any agreement with Big O Tires that allows Big O Tires to terminate that agreement can trigger a default under the sublease. This could include defaults under the franchise agreement, loan agreements, or any other contracts between the franchisee and Big O Tires.
For a potential franchisee, this highlights the importance of understanding and complying with all agreements they have with Big O Tires. A seemingly minor infraction under one agreement could have serious consequences, potentially leading to the termination of the sublease and, consequently, the franchise. Franchisees should carefully review all agreements and seek legal counsel to fully understand their obligations and the potential ramifications of a default.
It is also important to note that the FDD states that the term Sublessor may also include any of Sublessor's subsidiaries.