How does a default under the lease affect the Brueggers Bagels franchise agreement, and vice versa?
Brueggers_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
ncillary documents, estoppel certificates, non-disturbance agreements or any other agreements between Tenant and Landlord relating to the Lease upon the request of Franchisor. Tenant shall also provide to Franchisor at Franchisor's request, and Franchisor has the right to review, inspect and copy, records of Tenant for all Lease modifications, amendments, extensions, ancillary documents, estoppel certificates, non-disturbance agreements or any other agreements between Tenant and Landlord relating to the Lease.
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- Rights upon Termination of Franchise Agreement. If the Franchise Agreement is terminated or expires for any reason during the term of the Lease or any extension thereof, the Tenant, upon the written request of Franchisor, shall assign to Franchisor all of its right, title and interest in and to the Lease. If Franchisor elects to accept the assignment of the Lease from the Tenant, it shall give the Tenant and the Landlord written notice of its election to acquire the leasehold interest. The Landlord hereby consents to the assignment of the Lease from the Tenant to Franchisor, subject to the Tenant's and/or Franchisor's curing any defaults of the Tenant under the Lease before Franchisor takes possession of the Leased Premises. Alternatively, in the event of a termination or expiration of the
Franchise Agreement, Franchisor may elect to enter into a new lease with the Landlord containing terms and conditions no less favorable than the Lease. Upon the Landlord's receipt of written notice from Franchisor advising the Landlord that Franchisor elects to enter into a new lease, the Landlord shall execute and deliver such new lease to Franchisor for its acceptance. Notwithstanding anything set forth in this Agreement to the contrary, in the event of (i) the assignment of the Lease by Tenant to Franchisor, or (ii) the election by Franchisor to enter into a new lease in the manner set forth herein above, or (iii) the subsequent assignment of the existing lease or new lease to any franchisor, franchisee or developer of a bakery café operating under the Tradename pursuant to Paragraph 4 herein, this Agreement shall survive and remain in effect. The Landlord and the Tenant shall deliver possession of the Leased Premises to Franchisor, free and clear of all rights of the Tenant or third parties, subject to Franchisor's curing any defaults of the Tenant, under the Lease, and executing an acceptance of the assignment of Lease or the new lease, as the case may be.
Source: Item 22 — CONTRACTS (FDD page 61)
What This Means (2025 FDD)
According to Brueggers Bagels' 2025 Franchise Disclosure Document, the relationship between a lease default and the franchise agreement is multifaceted. Brueggers Bagels does not act as a guarantor for the franchisee's lease obligations. However, the document outlines scenarios where Brueggers Bagels can step in to assume the lease under certain conditions, particularly if the Franchise Agreement is terminated or expires.
Specifically, if a Brueggers Bagels franchisee breaches the Franchise Agreement, leading to termination or expiration, Brueggers Bagels has the option to request an assignment of the lease from the franchisee. Upon providing notice to both the landlord and the franchisee, the franchisee's rights under the lease are automatically assigned to Brueggers Bagels. The franchisee, however, remains liable for any obligations under the lease, even after the assignment. The landlord's consent is also granted for Brueggers Bagels to use the franchisee's personal property located on the premises, although this consent does not grant Brueggers Bagels any right to do so.
Alternatively, upon termination or expiration of the Franchise Agreement, Brueggers Bagels can choose to enter into a new lease with the landlord, provided the terms are no less favorable than the original lease. Upon written notice from Brueggers Bagels, the landlord is obligated to execute and deliver the new lease. In either scenario—assignment of the existing lease or creation of a new one—the agreement survives and remains in effect, especially if the lease is subsequently assigned to another franchisee or developer operating under the Brueggers Bagels tradename. The landlord must provide Brueggers Bagels with possession of the leased premises, free of any claims from the former franchisee or third parties, after Brueggers Bagels cures any outstanding defaults under the lease and accepts the assignment or new lease.
These provisions protect Brueggers Bagels' interest in maintaining the location for continued operation under its brand, even if the original franchisee fails. For a prospective franchisee, this highlights the importance of maintaining a good relationship with both Brueggers Bagels and the landlord to avoid triggering these clauses. It also underscores the need to understand all lease obligations, as the franchisee remains liable even if the lease is assigned to Brueggers Bagels due to a breach of the Franchise Agreement.