What constitutes a default of the Buns On Fire franchise agreement that would prevent renewal?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
For a period of two (2) years following termination, expiration, or non-renewal of this Agreement,
except where the termination occurs due to the fault or action of the Franchisor and not due to default of the Franchisee or any partner, if the Franchisee is a partnership, or any shareholder or member, if the Franchisee is a corporation or limited liability company, the Franchisee shall not, except with respect to the ownership or operation by Franchisee of additional Buns on Fire restaurants either directly or indirectly for himself or on the behalf of, or in conjunction with, any other person, persons, partnership, association or corporation, own, maintain, engage in, participate in, or have any interest in the operation of any Competitive Business, or which distributes, produces or sells the Products within (x), your Protected Territory as defined in Exhibit A; (y) the Protected Territory any other franchisee of Franchisor Business locations; or (z) the Protected Territory (as would be defined by the terms of Exhibit A) for any store operated by Franchisor. The restrictions of this Section shall not be applicable to the ownership of shares of a class of securities listed on a stock exchange or traded on the over-the-counter market that represents five percent (5%) or less of the number of shares of that class of securities issued and outstanding.
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
Based on the 2025 Buns On Fire Franchise Disclosure Document, the document does not explicitly detail what specific actions or omissions constitute a default that would prevent renewal of the franchise agreement. However, the FDD does mention conditions related to termination due to franchisee default and post-term covenants.
Specifically, the FDD indicates that if termination occurs due to the franchisee's default, the franchisee is subject to certain restrictions. For a period of two years following termination, expiration, or non-renewal, the franchisee is restricted from engaging in any Competitive Business within their Protected Territory, or the Protected Territory of any other Buns On Fire franchisee, or the Protected Territory for any store operated by the franchisor. This restriction does not apply if the termination occurs due to the fault or action of the franchisor.
To fully understand the conditions that would prevent renewal, a prospective Buns On Fire franchisee should carefully review the franchise agreement, paying close attention to the sections detailing termination and renewal. It would be prudent to consult with a franchise attorney to clarify what specific franchisee defaults would preclude renewal and to fully understand the implications of these clauses.