If a Buona franchisee loses possession of a significant part of the Franchised Restaurant due to condemnation, what condition must be met to avoid an Event of Default?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
3. Default.
- 3.1. Definitions. The term "Event of Default" means the occurrence and continuation of any one (1) or more of the following events:
- (a) any failure of Debtor promptly and faithfully to pay, observe and perform, when due, any of the Obligations;
- (b) if Debtor becomes insolvent, commits an act of bankruptcy, files a voluntary petition in bankruptcy, or an involuntary petition in bankruptcy is filed, or a permanent or temporary receiver or trustee for the Franchised Restaurant, or all or substantially all of the Debtor's property, is appointed by any court and such appointment is not actively opposed through legal action, or Debtor makes an assignment or arrangement for the benefit of creditors, or calls a meeting of creditors, or Debtor makes a written statement to the effect that he or it is unable to pay his or its debts as they become due, or a levy of execution is made upon Debtor, or an attachment or lien outstanding with respect to the Franchised Restaurant for thirty (30) days, unless the attachment or lien is being duly contested in good faith by Debtor and Secured Party is advised in writing
- (c) if Debtor loses possession or the right of possession of all or a significant part of the Franchised Restaurant through condemnation or casualty and the Franchised Restaurant is not relocated or reopened as required by the Franchise Agreement;
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, an Event of Default will not occur if a franchisee loses possession or the right of possession of all or a significant part of the Franchised Restaurant through condemnation or casualty, provided that the Franchised Restaurant is relocated or reopened as required by the Franchise Agreement.
This means that if a significant portion of the Buona restaurant is taken due to condemnation (eminent domain) or is rendered unusable due to an event like a fire (casualty), the franchisee must take steps to relocate or reopen the restaurant to avoid being in default of the franchise agreement. The specific requirements for relocation or reopening would be detailed elsewhere in the Franchise Agreement, and it is important for the franchisee to understand those obligations.
This clause protects Buona by ensuring that the franchisee makes an effort to continue operations even if the original location is no longer viable. For a prospective franchisee, this highlights the importance of having a business continuity plan and adequate insurance coverage to facilitate a quick relocation or reopening in the event of such unforeseen circumstances. It also emphasizes the need to understand the franchisor's requirements for relocation or reopening to avoid default.