What happens to the rights to establish and open Franchised Restaurants under the Buona Development Agreement if a Franchise Agreement has not been executed upon termination or expiration?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
- 7.4 Upon termination or expiration of this Agreement, all remaining rights granted to you to establish and open Franchised Restaurants under this Agreement for which a Franchise Agreement has not been executed shall automatically be null and void.
You shall have no right to establish, open or operate any Franchised Restaurants for which a Franchise Agreement has not been executed by us prior to the date of termination or expiration of this Agreement.
Upon termination or expiration of this Agreement, we will have the right to establish ourselves or through an affiliate or grant to a third party the right to establish a Franchised Restaurant within the Development Territory as long as there is no violation of the territorial protections granted to you under existing individual Franchise Agreements.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, if the Development Agreement terminates or expires, the developer loses all rights to establish and open Buona restaurants for which a Franchise Agreement has not been executed. This means that if a developer has plans to open multiple locations but hasn't finalized the Franchise Agreements for all of them before the Development Agreement ends, they will forfeit the right to open those remaining locations.
Buona retains the right to establish restaurants themselves, through affiliates, or by granting the right to a third party within the Development Territory. However, this is conditional; Buona must not violate any territorial protections granted to the developer under existing individual Franchise Agreements. So, while Buona can move into the territory, they can't infringe on the areas already secured by the franchisee's existing restaurants.
This clause underscores the importance of adhering to the Development Schedule and securing Franchise Agreements promptly. A prospective Buona franchisee needs to be aware that failing to finalize agreements in a timely manner could result in losing the opportunity to expand within their designated territory. This also highlights the need to understand the conditions under which the Development Agreement can be terminated, as outlined in section 7.3, to avoid losing development rights prematurely.