What constitutes a default under the Buona Development Agreement related to transfers, sales, or assignments?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
eloper, or any of its shareholders, members, managers, partners, officers or directors verbally or physically assaults or abuses any officer, director, member, manager or employee of Franchisor or any of its Affiliates, or any Buona franchisee or employees of franchisees, after receiving a verbal or written warning against this conduct from Franchisor regarding this conduct.
- 7.3 If you (i) fail to meet any of the deadlines set forth in the Development Schedule; (ii) fail to comply with any other term and condition of this Agreement; (iii) make or attempt to make a transfer, sale or assignment of this Agreement in violation of this Agreement; or (iv) you or other entity owned by the Owners are in default under any individual Franchise Agreement with us, or of any other agreement to which we are parties; any such event shall constitute a default under this Agreement. Upon any such default, we, in our sole discretion, may do any one or more of the following:
- (a) Terminate this Agreement and all rights granted hereunder to you without affording you any opportunity to cure the default effective immediately upon delivery to you of a written notice from us;
- (b) Reduce the number of Buona Restaurants which you have the right to establish and open pursuant to this Agreement and reduce the corresponding Development Territory; or
- (c) Exercise any other rights and remedies which we may have under applicable law.
- 7.4 Upon termination or expiration of this Agreement, all remaining rights granted to you to establish and open Buona Restaurants under this Agreement for which a Franchise Agreement has not been executed shall automatically be null and void.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a significant cause for default under the Development Agreement involves unauthorized transfers, sales, or assignments. Specifically, the agreement emphasizes that the rights granted to the developer are personal and based on the qualifications of the developer and their owners.
The Development Agreement explicitly states that the developer and their owners cannot directly or indirectly sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any interest in the Development Agreement or the developer entity to any third party. Any attempt to do so is considered null and void and constitutes a material default of the agreement. This restriction extends to transfers occurring by operation of law, including assignments by or to a trustee in bankruptcy, which are also considered a material default.
Buona includes these stipulations to maintain control over who is developing their franchise locations and to ensure that developers are committed to the long-term development plan rather than speculating on the resale of developmental rights. This is a fairly standard practice in franchising, as franchisors want to ensure that those expanding their brand are qualified and dedicated to the brand's standards. A prospective Buona developer should understand these restrictions fully, as any violation could lead to immediate termination of the Development Agreement and loss of development rights without an opportunity to cure the default.