What happens to outstanding royalty and advertising fund contributions if the Brain Balance franchise agreement is terminated due to franchisee default?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
- (c) Promptly pay to COMPANY all debts, including any outstanding Royalty and Advertising Fund contribution, arising from FRANCHISEE's obligations under this
Agreement, which shall upon termination for any default by FRANCHISEE include all damages, costs, and expenses, including reasonable attorney's fees, incurred by COMPANY in obtaining injunctive relief for the enforcement of any provision of this Agreement as a result of the default and all Royalty and Advertising Fund contributions for the entire unperformed term of this Agreement.
- (d) Promptly endeavor to collect all accounts receivable and file reports with respect thereto that derive from services provided by FRANCHISEE pursuant to this Agreement whether before or after termination of this Agreement and pay COMPANY any Royalty or Advertising Fund contribution due thereon in the amount and manner required by this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 70–72)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, if the franchise agreement is terminated due to franchisee default, the franchisee is responsible for promptly paying all outstanding debts to Brain Balance. This includes any unpaid royalty and advertising fund contributions that arose from the franchisee's obligations under the agreement.
In addition to outstanding payments, the franchisee is liable for all damages, costs, and expenses incurred by Brain Balance in obtaining injunctive relief to enforce any provision of the agreement due to the franchisee's default. This also includes all royalty and advertising fund contributions for the entire unperformed term of the franchise agreement. This means that Brain Balance can seek payment not only for what is currently owed, but also for the future revenue they expected to receive over the remaining life of the agreement.
Furthermore, the franchisee must still endeavor to collect all accounts receivable for services provided before and after the termination and pay Brain Balance any royalty or advertising fund contributions due on those amounts. This ensures that Brain Balance receives its share of revenue generated even after the franchise has been terminated. This could create a significant financial burden for a franchisee who has defaulted and had their agreement terminated.