Does a breach of a Development Agreement by a Brain Balance franchisee trigger a default under the Franchise Agreement?

According to Brain Balance's 2025 Franchise Disclosure Document, a breach of a Development Agreement by a franchisee does not automatically trigger a default under the Franchise Agreement. Specifically, Section 17.01(h) outlines various events that constitute a default, including breaches of other agreements between Brain Balance and the franchisee. However, there is an exception carved out.

The document states, "Notwithstanding anything to the contrary herein, this Section shall not apply to a breach of any Development Agreement entered into by FRANCHISEE (or its Affiliates and subsidiaries)." This means that if a Brain Balance franchisee fails to meet the obligations outlined in their Development Agreement, such as failing to open a certain number of centers within a specified timeframe, this failure will not be considered a default under the Franchise Agreement itself.

This provision offers some protection to franchisees who may face challenges in fulfilling their development obligations. However, it is important to note that Brain Balance retains other rights and remedies for breaches of the Franchise Agreement, as detailed elsewhere in the document. A prospective franchisee should carefully review the terms of both the Franchise Agreement and any Development Agreement to fully understand their respective obligations and the consequences of any breaches.