What constitutes 'routine litigation incidental to the business' that Buona considers an exception to required disclosures regarding pending actions?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
Except as provided above, with regard to the franchisor, its predecessor, a person identified in Item 2, or an affiliate offering franchises under the franchisor's principal trademark:
- A. No such party has an administrative, criminal or civil action pending against that person alleging: a felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or misdemeanor allegations.
- B. No such party has pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the franchise system or its business operations.
- C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10 year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.
- D. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a Federal, State, or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending action or proceeding brought by a public agency; or is subject to any
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, Item 3 includes an exception to required disclosures regarding pending actions. Buona does not have to disclose pending actions that are considered 'routine litigation incidental to the business.' However, the FDD does not define what constitutes 'routine litigation incidental to the business' in the context of the number of franchisees and the size, nature, or financial condition of the franchise system or its business operations.
Without a clear definition in the FDD, prospective franchisees face uncertainty about what types of legal actions Buona considers routine and, therefore, does not disclose. This lack of transparency makes it difficult for potential franchisees to assess the full scope of legal risks associated with investing in a Buona franchise.
To gain clarity, a prospective franchisee should ask Buona for specific examples of what they consider 'routine litigation incidental to the business.' Understanding the nature and frequency of these types of legal actions will help the franchisee make a more informed decision. They should also inquire about the criteria Buona uses to determine whether litigation is 'significant' enough to warrant disclosure, considering the size and financial health of the franchise system.