If a Brain Balance franchisee's officer is convicted of embezzlement, can the franchise agreement be terminated?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
20.02. FRANCHISEE acknowledges that its franchise is one of a number of Brain Balance® Centers using COMPANY's service marks and style of conduct and that the failure on the part of FRANCHISEE to comply with any of the terms of this Agreement could cause irreparable damage to some or all of the other offices franchised or operated by COMPANY and to COMPANY's business. Therefore, and notwithstanding the provisions contained in Paragraph 20.01 above, FRANCHISEE agrees that upon the happening of any Non-Curable Default or Event of Default set forth in Section 17.01 or 17.02, or in the event of a threatened breach by FRANCHISEE of any of the terms of this Agreement, COMPANY shall have the immediate right to secure a court order enjoining any such default or threatened breach. If this Agreement shall have been terminated, FRANCHISEE may be enjoined from any continued operation of any Center franchised under this Agreement and/or the Franchised Business. This covenant shall be independent and severable and shall be enforceable notwithstanding any other rights or remedies that either party may have.
Source: Item 22 — CONTRACTS (FDD pages 70–72)
What This Means (2025 FDD)
According to the 2025 Brain Balance Franchise Disclosure Document, the FDD does not explicitly state that a franchisee's officer being convicted of embezzlement is grounds for termination of the franchise agreement. However, the agreement does state that upon the occurrence of an Event of Default, Brain Balance, at its option, may terminate the agreement on five (5) days' written notice without a right to cure.
To fully understand the circumstances under which Brain Balance can terminate the franchise agreement, a prospective franchisee should carefully review Section 17.01 and 17.02, referenced in paragraph 20.02, to understand what constitutes a Non-Curable Default or Event of Default. These sections would outline the specific actions or inactions that could lead to termination.
It is important for a potential Brain Balance franchisee to discuss with the franchisor what specific circumstances would constitute an Event of Default that would allow Brain Balance to terminate the franchise agreement. Understanding these conditions is crucial for protecting their investment and ensuring compliance with the franchise agreement.