What happens if a Buona franchisee is in default of any agreement with the franchisor at the time of renewal?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
16.5 Cross-Default and Cross-Termination Provisions.
(a) A default by Franchisee under this Agreement will be deemed a default of all agreements between Franchisee (or any affiliate of Franchisee) and Franchisor or its Affiliates.
A default by Franchisee under any other agreement between Franchisee (or any affiliate of Franchisee) and Franchisor or its Affiliates will be deemed a default under this Agreement.
A default by the guarantors of this Agreement or any other agreement of guaranty will be deemed a default of this Agreement.
For purposes of clarity, any agreements between Franchisee (or any affiliate of Franchisee) and Franchisor or its Affiliates include, without limitation, any other Franchise Agreement or Area Developer Agreement.
- (b) If this Agreement is terminated as a result of a default by Franchisee (or any affiliate of Franchisee), Franchisor or its Affiliates may, at their option, elect to terminate any or all other agreements between Franchisee (or an affiliate of Franchisee) and Franchisor or its Affiliates.
If any other agreement between Franchisee (or any affiliate of Franchisee) and Franchisor or its Affiliates is terminated as a result of a default by Franchisee (or any affiliate of Franchisee), Franchisor may, at its option, elect to terminate this Agreement.
It is agreed that an incurable or uncured default under this Agreement or any other agreement between Franchisee (or any affiliate of Franchisee) and Franchisor or its Affiliates will be grounds for termination of this Agreement and/or all agreements between Franchisee (or any affiliate of Franchisee) and Franchisor or its Affiliates without additional notice or opportunity to cure.
- 16.6 Arrearage Agreement.
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.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a default by a franchisee under any agreement with Buona or its affiliates can have significant consequences. Specifically, a default by a franchisee under one agreement is considered a default under all agreements between the franchisee (or their affiliates) and Buona or its affiliates. This "cross-default" provision means that if a franchisee fails to meet the terms of one agreement, Buona can declare a default on all agreements.
Furthermore, if any agreement between the franchisee (or an affiliate) and Buona is terminated due to a default by the franchisee (or an affiliate), Buona has the option to terminate the franchise agreement. This cross-termination clause gives Buona considerable power to end multiple agreements if the franchisee fails to uphold their obligations under any single agreement. This includes any Arrearage Agreement, which covers past due amounts; defaulting on such an agreement is considered a material default of the Franchise Agreement itself.
These provisions highlight the importance of franchisees maintaining compliance with all agreements they have with Buona. The cross-default and cross-termination clauses create a situation where a relatively minor default under one agreement could trigger the loss of the entire franchise and any other related business arrangements. Prospective franchisees should carefully review all agreements and ensure they have the resources and ability to meet all obligations to avoid potentially losing their franchise.