Can Buns On Fire suspend their own obligations to the franchisee as a remedy?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
- Section 4.01 of the Franchisee Agreement shall be amended to add the following language:
"Notwithstanding the foregoing, payment of the Initial Franchise Fee shall be deferred until we have satisfied our pre-opening obligations, and you have commenced operation of your Buns on Fire Restaurant."
SMYA VENTURES LLC
HAWAII ADDENDUM TO FRANCHISE AGREEMENT
- Section 4.01 of the Franchisee Agreement shall be amended to add the following language:
"Notwithstanding the foregoing, payment of the Initial Franchise Fee shall be deferred until we have satisfied our pre-opening obligations and you have commenced operation of your Buns on Fire Restaurant."
- The franchise agreement and any document signed in connection with the franchise are supplemented with the following language:
No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement by any franchisor, franchise seller, or other person acting on behalf of franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the Illinois, Hawaii, and California addenda to the Buns on Fire franchise agreement specify that the payment of the initial franchise fee is deferred until Buns on Fire has fulfilled its pre-opening obligations and the franchisee has commenced operations. This deferral is explicitly stated in Section 4.01 of the Franchisee Agreement, as amended by these state-specific addenda. This amendment ensures that franchisees in these states do not have to pay the initial franchise fee until Buns on Fire has met its obligations.
For franchisees in Illinois, this deferral is further reinforced by Section 200.508 of the Illinois Administrative Rules, which defers the payment of the initial franchise fee and all other fees owed to the franchisor or its affiliates until all initial obligations to the franchisee have been fulfilled and the franchisee has started doing business. The Illinois Attorney General's Office imposed this requirement due to Buns on Fire's financial condition. This provides additional protection to franchisees in Illinois, ensuring they are not financially burdened until the franchisor has met its commitments.
These provisions in the Buns on Fire franchise agreement, particularly the state-specific addenda for Illinois, Hawaii, and California, offer a degree of financial security to new franchisees. By deferring the initial franchise fee until pre-opening obligations are met and operations have commenced, Buns on Fire mitigates some of the initial financial risks for franchisees. This arrangement ensures that franchisees are not paying fees upfront without receiving the necessary support and fulfillment of obligations from the franchisor, aligning the interests of both parties during the critical initial phase of the franchise relationship.