What are the obligations of a Brightstar Care franchisee upon termination or non-renewal of the franchise agreement?
Brightstar_Care Franchise · 2025 FDDAnswer from 2025 FDD Document
Care Agency will be located in California.
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- The following language is added to the Franchise Agreement as new Section 14.3:
Upon our termination of this Agreement in compliance with its terms, your termination of this Agreement without cause in breach of this Agreement, or expiration of this Agreement (if we offer you the right to renew the franchise for the Franchised Business but you choose not to renew), we have the right (but no obligation), exercisable by giving you written notice before or within thirty (30) days after the effective date of termination or expiration, to purchase the Agency's business and related goodwill (other than any goodwill we already own). We have the unrestricted right to assign this purchase option to a third party (including an affiliate), which then will have the rights and obligations described in this Section 14.3. We (or our designee) are entitled to all customary representations, warranties, and indemnities in our purchase, including representations and warranties regarding ownership and condition of, and title to, assets; liens and encumbrances on assets; validity of contracts and liabilities affecting the assets, contingent or otherwise; and indemnities for all actions, events, and conditions that existed or occurred in connection with the Agency before the closing of the purchase. You also agree (at our option) to assign to us (or our designee) the lease for the Agency's premises or to enter into a sublease for the remainder of the lease term on the same terms (including renewal options) as the lease.
If we (or our designee) elect to purchase the Agency's business and related goodwill under this Section 14.3, the purchase price will be equal to the greater of (a) one-and-one-half (1.5) multiplied by the Agency's Adjusted EBITDA (defined below) during the twelve (12) full calendar months immediately preceding the effective date of termination or expiration of this Agreement and (b) One Thousand Dollars ($1,000) for each active client of the Franchised Business as of the effective date of termination or expiration that is fully and effectively transferred and transitioned to us (or our designee) as part of our purchase.
"Adjusted EBITDA" means EBITDA (i.e., net income before interest, taxes, depreciation and amortization) plus adjustments for (1) nonrecurring related revenue or expense activities, (2) profit attributed to one-time or short-term business opportunities resulting from National Account participation or local contracts where business is not expected to continue for longer than twelve (12) months (shortterm staffing that is other than COVID-specific staffing will not be used as an adjustment unless it represents more than 20% of the Agency's trailing twelve (12)-month revenue, (3) add-backs for owner discretionary expenses and compensation that will not continue offset by fair-market replacement cost for the owner's day-to-day participation, (4) client price adjustments that have not been fully reflected in trailing results, (5) business expense activities that are not fully reflected in trailing results, and (6) expenses that would have been incurred had the Agency been in full compliance with this Agreement before the effective date of termination or expiration.
We (or our designee) will pay the purchase price at the closing, which will take place not later than thirty (30) days after we notify you that we (or our designee) are exercising our right to purchase, as provided above.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 81–92)
What This Means (2025 FDD)
According to Brightstar Care's 2025 Franchise Disclosure Document, a franchisee's obligations upon termination or non-renewal include certain restrictions and potential purchase options for the franchisor. Specifically, Brightstar Care has the right, but not the obligation, to purchase the agency's business and related goodwill if the agreement is terminated by Brightstar Care in compliance with its terms, terminated by the franchisee without cause in breach of the agreement, or upon expiration of the agreement if the franchisee chooses not to renew, provided Brightstar Care gives written notice within thirty days of termination or expiration. Brightstar Care can assign this purchase option to a third party.
As part of this purchase, Brightstar Care (or its designee) is entitled to customary representations, warranties, and indemnities, including those regarding asset ownership, condition, title, liens, encumbrances, contract validity, and liabilities. These also include indemnities for actions, events, and conditions connected to the agency before the purchase closing. The franchisee may also be required to assign the agency's lease to Brightstar Care or enter into a sublease under the same terms as the original lease.
Additionally, the Brightstar Care franchisee is restricted from soliciting or providing services to customers within the territory who were serviced by the agency during the agreement's term. This includes National Accounts customers and referral sources. These non-solicitation restrictions apply in place of the standard post-term non-competition obligations outlined in other sections of the agreement. A "Similar Business" is defined as one providing supplemental healthcare staff, homecare services, case management, care management services, or other services, technology, devices, or products authorized by Brightstar Care.
These obligations are in addition to other post-term obligations detailed in the agreement. Prospective franchisees should carefully review these sections to understand the full scope of their responsibilities upon termination or non-renewal, as these can significantly impact their ability to operate a similar business after the franchise agreement ends.