What constitutes a default that would prevent a Buns On Fire franchisee from renewing their franchise agreement?
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, a franchisee's default can impact their ability to renew their franchise agreement. Specifically, if the termination of the franchise agreement occurs due to the franchisee's default, they may face certain post-term covenants.
These covenants restrict the franchisee from engaging in any competitive business within their protected territory, the protected territory of other Buns On Fire franchisees, or the protected territory of any store operated by the franchisor for a period of two years following the termination, expiration, or non-renewal. This restriction does not apply if the termination is due to the fault or action of the franchisor.
This implies that if a Buns On Fire franchisee is in default, leading to the termination of their agreement, they will not only lose the franchise but also be restricted from operating a similar business in a defined geographical area for two years. This could significantly impact their ability to continue in the restaurant industry, making it crucial for franchisees to remain compliant with the franchise agreement to avoid such restrictions.