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What happens if the Bombs Away franchise agreement has been terminated during arbitration?

Bombs_Away Franchise · 2024 FDD

Answer from 2024 FDD Document

a felony; or

  • (xiii) Franchisee or any Owner is accused by any governmental authority or third party of any act, or if Franchisee or any Owner commits any act or series of acts, that in Bombs Away Franchising's opinion is reasonably likely to materially and unfavorably affect the Bombs Away brand.
  • 14.3 Effect of Termination. Upon termination or expiration of this Agreement, all obligations that by their terms or by reasonable implication survive termination, including those pertaining to

non-competition, confidentiality, indemnity, and dispute resolution, will remain in effect, and Franchisee must immediately:

  • (i) pay all amounts owed to Bombs Away Franchising based on the operation of the Business through the effective date of termination or expiration;
  • (ii) return to Bombs Away Franchising all copies of the Manual, Confidential Information and any and all other materials provided by Bombs Away Franchising to Franchisee or created by a third party for Franchisee relating to the operation of the Business, and all items containing any Marks, copyrights, and other proprietary items; and delete all Confidential Information and proprietary materials from electronic devices;
  • (iii) notify the telephone, internet, email, electronic network, directory, and listing entities of the termination or expiration of Franchisee's right to use any numbers, addresses, domain names, locators, directories and listings associated with any of the Marks, and authorize their transfer to Bombs Away Franchising or any new franchisee as may be directed by Bombs Away Franchising, and Franchisee hereby irrevocably appoints Bombs Away Franchising, with full power of substitution, as its true and lawful attorney-in-fact, which appointment is coupled with an interest; to execute such directions and authorizations as may be necessary or appropriate to accomplish the foregoing; and
  • (iv) cease doing business under any of the Marks.
  • 14.4 Remove Identification. If Franchisee operates from a Location other than Franchisee's home, then within 30 days after termination or expiration, Franchisee shall at its own expense "deidentify" the Location so that it no longer contains the Marks, signage, or any trade dress of a Bombs Away business, to the reasonable satisfaction of Bombs Away Franchising. Franchisee shall comply with any reasonable instructions and procedures of Bombs Away Franchising for deidentification. If Franchisee fails to do so within 30 days after this Agreement expires or is terminated, Bombs Away Franchising may enter the Location to remove the Marks and de-identify the Location. In this event, Bombs Away Franchising will not be charged with trespass nor be accountable or required to pay for any assets removed or altered, or for any damage caused by Bombs Away Franchising.
  • 14.5 Liquidated Damages. If Bombs Away Franchising terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 14.1), then within 10 days thereafter Franchisee shall pay to Bombs Away Franchising a lump sum (as liquidated damages and not as a penalty) calculated as follows: (x) the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Bombs Away Franchising under this Agreement for the 12-month period preceding the date on which Franchisee ceased operating the Business; multiplied by (y) the lesser of (1) 24 or (2) the number of months remaining in the then-current term of this Agreement. If Franchisee had not operated the Business for at least 12 months, then (x) will equal the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Bombs Away Franchising during the period that Franchisee operated the Business.

Source: Item 22 — CONTRACTS (FDD pages 35–36)

What This Means (2024 FDD)

According to the 2024 Bombs Away FDD, even if the franchise agreement has been terminated, certain obligations remain in effect. These include obligations pertaining to non-competition, confidentiality, indemnity, and dispute resolution.

Specifically, the franchisee must immediately pay all amounts owed to Bombs Away based on the business's operation up to the termination date. The franchisee is also required to return all copies of the manual, confidential information, and any other materials provided by Bombs Away, including items containing trademarks, copyrights, and proprietary items. All confidential and proprietary materials must be deleted from electronic devices.

Additionally, the franchisee must notify all relevant entities (telephone, internet, email, etc.) of the termination of their right to use any numbers, addresses, domain names, or listings associated with Bombs Away's marks and authorize their transfer to Bombs Away or a new franchisee. The franchisee must also cease doing business under any of Bombs Away's marks. If the franchisee operates from a location other than their home, they must de-identify the location within 30 days, removing all Bombs Away marks and trade dress to Bombs Away's reasonable satisfaction. If the franchisee fails to do so, Bombs Away may enter the location to remove the marks and de-identify the location without being charged with trespass or being liable for any damage caused during the process.

Furthermore, if Bombs Away terminates the agreement due to the franchisee's default, the franchisee must pay liquidated damages within 10 days. These damages are calculated based on the average royalty fees and marketing fund contributions owed for the 12-month period preceding the cessation of business, multiplied by the lesser of 24 or the number of months remaining in the agreement's term. Bombs Away also has the option to purchase the business's assets after termination, with the purchase price being the lower of the book value or fair market value, excluding any value for trademarks or goodwill.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.