What happens if a Buona developer or its owners are convicted of a felony?

According to Buona's 2025 Franchise Disclosure Document, the Area Development Agreement can be terminated if the developer, or any of its shareholders, members, managers, partners, officers, directors or guarantors, is indicted for, convicted of, or pleads guilty to a felony. This also applies to crimes involving moral turpitude, or any other crime or offense that Buona believes is reasonably likely to have an adverse effect on the Buona system, the Marks, or the goodwill associated with the system and the Marks, or Buona's interest in the system or the Marks.

This provision gives Buona broad discretion to terminate the agreement based on a wide range of criminal activities, even beyond felonies, if they perceive a potential negative impact on their brand or interests. The termination is automatic and without an opportunity to cure, meaning the developer loses all rights immediately upon written notice from Buona. This could result in a significant financial loss for the developer, who may have already invested considerable time and money in developing the territory.

This type of clause is relatively common in franchise agreements, as franchisors need to protect their brand and reputation. However, the breadth of this clause in the Buona agreement, which includes 'any other crime or offense' that Buona deems harmful, is something prospective developers should carefully consider. It's crucial to understand what types of actions could trigger termination and to assess the risk this poses to their investment.

Prospective Buona developers should seek legal counsel to fully understand the implications of this clause and potentially negotiate for more specific and limited grounds for termination related to criminal activity. They should also ensure that all owners and key personnel associated with the development entity have a clear understanding of these requirements to avoid any actions that could jeopardize the agreement.