Does Brain Balance consider routine litigation incidental to the business as a disclosable pending action?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
- C. Is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a federal, State or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending action or proceeding brought by a public agency; or is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities and Exchange Act of 1934, suspending or expelling such person from membership in such association or exchange; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent.
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- The following is added to the end of Item 4:
Neither we nor any of our affiliates, predecessors, officers or general partners during the 10-year period immediately before the date of this Disclosure Document has (a) filed as debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy Code; (b) obtained a discharge of its debts under the bankruptcy code; or (c) was a principal officer of a company or a general partner in a partnership that either filed as a debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy Code or that obtained a discharge of its debts under the U.S. Bankruptcy Code during or within 1 year after the officer or general partner of the franchisor held this position in the company or partnership.
Source: Item 23 — RECEIPTS (FDD pages 72–292)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, Brain Balance does not explicitly state whether routine litigation incidental to the business is considered a disclosable pending action. However, the document does address certain legal and regulatory requirements. For example, it notes that any provision in the franchise agreement prohibiting franchisees from communicating with regulators is unlawful under Washington law. It also mentions requirements under California law regarding material modifications to the franchise agreement. These disclosures suggest an awareness of the need to comply with franchise-related regulations.
Item 3 of the FDD includes an addition that neither Brain Balance nor its affiliates, predecessors, officers, or general partners have filed for bankruptcy or obtained a discharge of debts under the U.S. Bankruptcy Code within the 10 years before the document's date. It also states that none of these parties were principal officers of a company or general partners in a partnership that filed for bankruptcy or obtained a discharge of debts under the U.S. Bankruptcy Code during or within one year after their tenure. This indicates a focus on disclosing significant financial or legal events that could impact the franchise system.
While the FDD touches on legal compliance and specific legal events like bankruptcy, it does not directly address the handling of routine litigation. A prospective franchisee should seek clarification from Brain Balance regarding their policy on disclosing pending litigation, especially if such litigation could materially affect the operation or financial stability of a franchise location. Understanding the franchisor's approach to disclosing legal matters is crucial for making an informed investment decision.