If execution is levied against a Buona franchisee's property or business, does this constitute a default?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
XVI. DEFAULT AND TERMINATION
- 16.1 Termination Without Notice Due To Insolvency.
Franchisee shall be deemed to be in default under this Agreement, and all rights granted herein shall automatically terminate without notice to Franchisee, if Franchisee shall become insolvent or make a general assignment for the benefit of creditors; if a petition in bankruptcy is filed by Franchisee or such a petition is filed against Franchisee and not opposed by Franchisee; if Franchisee is adjudicated bankrupt or insolvent; if a receiver or other custodian (permanent or temporary) of Franchisee's assets or property, or any part thereof, is appointed by any court of competent jurisdiction; if proceedings for a composition with creditors under applicable law of any jurisdiction should be instituted by Franchisee or against Franchisee and not opposed by Franchisee; if a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless a supersedeas bond is filed); if Franchisee is dissolved; if execution is levied against Franchisee's property or business; if suit to foreclose any lien or mortgage against the premises or equipment of the Franchised Business is instituted against Franchisee and not dismissed within thirty (30) days; or if the real or personal property of the Franchised Business shall be sold after levy thereon by any sheriff, marshal or constable.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, if execution is levied against a franchisee's property or business, it constitutes a default under the franchise agreement. Specifically, the agreement states that a franchisee will be considered in default, leading to automatic termination without notice, if 'execution is levied against Franchisee's property or business.'
This means that if a legal judgment results in authorities seizing a Buona franchisee's assets or business property to satisfy a debt, Buona has the right to immediately terminate the franchise agreement. This is a significant risk for franchisees, as it means a single adverse legal outcome could result in the loss of their franchise.
It is important to note that this clause does not typically allow for a cure period, meaning the franchisee does not have an opportunity to resolve the issue before termination. This is stricter than some franchise agreements, which may allow a cure period for financial defaults. Prospective Buona franchisees should carefully consider the implications of this clause and ensure they have adequate legal and financial safeguards in place to prevent such a situation from arising.