If a Buona franchisee defaults on an Arrearage Agreement, is that considered a material default of the franchise agreement, regardless of the reason for non-payment?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
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, defaulting on an Arrearage Agreement is considered a material default of the franchise agreement, regardless of the reason for non-payment. An Arrearage Agreement is defined as any agreement between the franchisee and Buona or its affiliates relating to past due amounts. This includes promissory notes, payment plans, or amendments to the franchise agreement. Buona emphasizes that any Arrearage Agreement is considered a material part of the franchise agreement and is incorporated by reference.
This means that if a Buona franchisee fails to meet the obligations outlined in an Arrearage Agreement, it constitutes a significant breach of the franchise agreement. The FDD explicitly states that a default under any Arrearage Agreement is deemed a material default, irrespective of why the franchisee couldn't fulfill the payment. This could have serious consequences, potentially leading to termination of the franchise agreement.
For a prospective Buona franchisee, this highlights the importance of carefully managing finances and ensuring timely payments to avoid falling into arrears. If a franchisee does encounter financial difficulties and enters into an Arrearage Agreement with Buona, strict adherence to the terms of that agreement is crucial. Failure to comply, for any reason, could trigger severe penalties, including the loss of the franchise. This clause underscores the binding nature of all agreements with Buona and the potential ramifications of non-compliance.