If a Brain Balance franchisee is convicted of embezzlement, can the franchise agreement be terminated?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
- 17.03. (a) Upon the occurrence of an Event of Default, COMPANY, at its option, may terminate this Agreement on five (5) days' written notice (or a notice for a longer period of time as may be required by the law of the jurisdiction in which FRANCHISEE's Center is located) without a right to cure, and this Agreement, together with the Franchise granted hereunder, shall thereupon expire.
Source: Item 22 — CONTRACTS (FDD pages 70–72)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, whether a Brain Balance franchise agreement can be terminated if the franchisee is convicted of embezzlement depends on whether such an event is defined as an 'Event of Default' in the agreement. The FDD states that upon the occurrence of an Event of Default, Brain Balance has the option to terminate the agreement with only five days' written notice, without providing an opportunity for the franchisee to correct the issue. The notice period could be longer depending on local laws.
However, the excerpts provided do not explicitly list 'embezzlement' as a specific cause for default. Instead, the agreement lists more general reasons for termination, such as breaching the Software Agreement or failing to meet obligations to designated suppliers. It also mentions the possibility of termination if the franchisee fails to operate the Brain Balance Center.
Therefore, while the FDD details Brain Balance's rights to terminate the agreement under certain default conditions, it does not directly address the scenario of a franchisee being convicted of embezzlement. A prospective franchisee should carefully review the full franchise agreement and consult with a legal professional to understand all potential causes for termination, including whether criminal convictions like embezzlement would be considered a breach of contract leading to termination.