What happens if Bombs Away Franchising binds a holdover franchisee to a renewal term?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.10 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 thereafter (regardless of any course of dealing by the parties), Bombs Away Franchising may by giving written notice to Franchisee (the "Holdover Notice") either (i) require Franchisee to cease operating the Business and comply with all postclosing obligations effective immediately upon giving notice or effective on such other date as Bombs Away Franchising specifies, or (ii) bind Franchisee to a renewal term of 5 years, 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 pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, Bombs Away Franchising has the option to bind a franchisee to a renewal term of 5 years if the franchisee continues to operate the business after the expiration of the original term, without a renewal or successor agreement in place. This is regardless of any previous course of dealing between the parties.
If Bombs Away Franchising chooses to bind the holdover franchisee to a renewal term, they will provide written notice, called the "Holdover Notice", to the franchisee. By doing so, the franchisee and its owners are deemed to have made a general release of liability as described in Section 3.2(vi) of the franchise agreement.
This clause provides Bombs Away Franchising with significant leverage over a franchisee who remains in operation after the franchise term expires. The franchisee is essentially forced into a 5-year renewal term and must provide a general release of liability, potentially waiving any claims they might have against Bombs Away. Franchisees should be aware of this holdover provision and carefully consider their options well in advance of the expiration of their franchise term to avoid being placed in this situation.