Does a default under the Buona Development Agreement automatically constitute a default under any individual Franchise Agreement?

According to Buona's 2025 Franchise Disclosure Document, a default under the Development Agreement does not automatically constitute a default under any individual Franchise Agreement between the parties. The FDD specifies that the terms and conditions of each Franchise Agreement must be complied with by the franchisee and will be the controlling factor in determining if a default exists under that specific Franchise Agreement. This means that each agreement operates independently in terms of default conditions.

This separation of default conditions provides a level of security for franchisees. If a situation occurs that triggers a default under the Development Agreement, it will not automatically jeopardize the individual Franchise Agreements already in place. Each franchise location's agreement stands on its own and is evaluated separately for compliance.

However, it is important to note that while a default under the Development Agreement doesn't automatically trigger a default under the Franchise Agreement, the reverse is not necessarily true. The Development Agreement states that if the franchisee is in default under any individual Franchise Agreement, it will constitute a default under the Development Agreement. This creates a situation where problems at a single franchise location can have broader implications for the entire development agreement.

Prospective Buona franchisees should carefully review both the Development Agreement and the individual Franchise Agreement to fully understand the default conditions and how they interact. Understanding these conditions is crucial for managing risk and ensuring compliance with both agreements.