If a Brain Balance franchisee's shareholder breaches another agreement with the company, can this trigger termination of the franchise agreement?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
lving moral turpitude;
- (f) FRANCHISEE receives from COMPANY three (3) or more notices to cure defaults or violations of this Agreement within a twelve (12) month period;
- (g) failure to achieve $350,000 of GR in any 12-month period following the third anniversary of the date of the Franchise Agreement or in any year of the Franchise Agreement if a renewal agreement; or
- 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
Source: Item 22 — CONTRACTS (FDD pages 70–72)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, a breach by a shareholder of the franchisee of any other agreement with Brain Balance or its affiliates can be considered a default under the franchise agreement. Specifically, if the franchisee, or its principals, partners, members, officers, shareholders, directors, or their respective spouses, breaches any agreement with Brain Balance (or its Affiliates and subsidiaries) or any entity with which the franchisee, any of its officers, shareholders, directors, employees, partners, or members is an Affiliate, it will be deemed a default under the Franchise Agreement.
This means that if a shareholder of a Brain Balance franchise has a separate agreement with the company (or its affiliates) and breaches that agreement, Brain Balance could consider it a breach of the franchise agreement itself. This clause extends the franchisee's obligations to related parties and entities, increasing the risk of default.
Furthermore, if the default under the other agreement would have allowed Brain Balance to terminate that agreement, Brain Balance has the right to terminate all agreements, including the franchise agreement. However, this condition does not apply to breaches of any Development Agreement entered into by the franchisee (or its Affiliates and subsidiaries). This provision gives Brain Balance significant power to terminate the franchise agreement based on actions of related parties, so prospective franchisees should carefully review all agreements and ensure compliance by all relevant parties to avoid potential default and termination.