How does Brain Balance define 'Affiliate' in the context of default and termination?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
- the occurrence of any default or breach by FRANCHISEE (or its (h) principals, partners, members, officers, shareholders or directors, or their respective spouses) of any other agreement between COMPANY (or its Affiliates and subsidiaries) and FRANCHISEE or any entity with which FRANCHISEE, any of its officers, shareholders, directors, employees, partners, or members is an Affiliate shall be deemed a default under this Agreement. Any default or breach of this Agreement by FRANCHISEE or any entity with which FRANCHISEE, any of its officers, shareholders, directors, employees, partners, or members is an Affiliate, shall be deemed a default or breach under any and all other agreements between Franchisor (or its Affiliates and subsidiaries) and FRANCHISEE (or any entity with which FRANCHISEE, any of its officers, shareholders, directors, employees, partners, or members is an Affiliate). If the nature of such default under any other agreement would have permitted Franchisor to terminate this Agreement had said default occurred hereunder, Franchisor shall have the right to terminate all of the other agreements between Franchisor and FRANCHISEE, in the same manner provided for herein for termination of this Agreement. 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). For purposes of this section 17.01(h), Affiliate shall refer to any person or entity controlling, controlled by, or under common control with the subject person or entity.
Source: Item 22 — CONTRACTS (FDD pages 70–72)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, an 'Affiliate' is defined specifically within the context of defaults and breaches of agreements. The FDD states that a default or breach by a franchisee, or any entity with which the franchisee (or its officers, shareholders, directors, employees, partners, or members) is an Affiliate, is considered a default under all agreements between Brain Balance (or its affiliates and subsidiaries) and the franchisee (or any entity with which the franchisee or its related parties are affiliated).
For the purposes of default and termination, Brain Balance defines 'Affiliate' as any person or entity controlling, controlled by, or under common control with the subject person or entity. This means that if a franchisee has a business partner or owns another company that is under their control, any default by that partner or company could trigger a default under the Brain Balance franchise agreement.
This definition has significant implications for prospective franchisees. It broadens the scope of potential defaults beyond just the franchisee's direct actions. Franchisees need to be aware that their other business ventures and relationships could impact their Brain Balance franchise. It is important to carefully review all agreements with Brain Balance and understand how the actions of affiliated entities could lead to a default and potential termination of the franchise agreement. Franchisees should seek legal counsel to fully understand these implications before signing the agreement.