For Buona, is a default under any Arrearage Agreement considered a material default of the franchise agreement?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding anything to the contrary set forth in this Agreement, Franchisee hereby acknowledges that any agreement between Franchisee and Franchisor or its Affiliates relating to past due amounts accruing hereunder (an "Arrearage Agreement"), including but not limited to any promissory note, payment plan or amendment to this Agreement shall be deemed to be a material part of this Agreement and shall be incorporated herein by reference.
A default under any Arrearage Agreement shall be deemed a material default of this Agreement, regardless of the reason Franchisee fails to pay the amount that is the subject of an Arrearage Agreement.
This provision does not require Franchisor to waive any payments due from Franchisee or to enter into any Arrearage Agreement.
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a default under any Arrearage Agreement is considered a material default of the Franchise Agreement. This applies regardless of the reason the franchisee fails to pay the amount specified in the Arrearage Agreement. An Arrearage Agreement is defined as any agreement between the franchisee and Buona or its affiliates relating to past due amounts. This includes promissory notes, payment plans, or amendments to the Franchise Agreement.
This provision means that if a Buona franchisee enters into an agreement to pay off past-due amounts and then fails to meet the terms of that agreement, it will be considered a serious breach of the Franchise Agreement. This could potentially lead to termination of the franchise. The FDD emphasizes that this provision does not obligate Buona to waive any payments due from the franchisee or to even enter into an Arrearage Agreement in the first place.
This clause is significant for prospective franchisees as it highlights the importance of maintaining timely payments and fulfilling financial obligations to Buona. It also underscores the potential consequences of failing to adhere to any repayment plans or agreements made with the franchisor. Franchisees should carefully consider their financial capabilities and ensure they can meet all payment obligations to avoid such a material default.
Many franchise agreements contain clauses about defaults and termination, but the specific inclusion of Arrearage Agreements as a material default is something a potential franchisee should carefully consider. It places extra emphasis on the importance of adhering to any negotiated payment plans with Buona.