If a Buona franchisee's lease is terminated, does this constitute a default?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee commits any of the following breaches and fails to cure the same within thirty (30) days following Franchisor's written notice to Franchisee:
- (a) Franchisee fails or refuses to maintain and operate its Franchised Business in compliance with this Agreement, the System and the Manual (other than in a manner that constitutes a default of Sections 16.1, 16.2 or 16.3 for which those sections are controlling), including, but not limited to failing to complete a Franchised Business Renovation, within the time frame required by this Agreement, at Franchisee's expense; or
- (b) Franchisee fails to comply with any other term or condition in this Agreement not specifically listed in Sections 16.1, 16.2, or 16.3 above.
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. This provision does not require Franchisor to waive any payments due from Franchisee or to enter into any Arrearage Agreement.
- 16.7 Statutory Cure Period. If a default is curable under this Agreement, and the applicable law in the state in which the Franchised Business is located requires a longer cure period than that specified in this Agreement, the longer period will apply.
- 16.8 Right to Operate Upon Default**.** In addition to Franchisor' right to terminate this Agreement and not in lieu of such right or any other rights, in the event that Franchisee has not cured a default under this Agreement within fourteen (14) days after receipt of a written notice of default, Franchisor may, at its option, enter upon the Premises and exercise complete authority with respect to the operation of the Franchised Business until such time as Franchisor determines that the default has been cured and that there is compliance with the requirements of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a default by a franchisee under the Franchise Agreement is considered a default of all agreements between the franchisee (or any affiliate) and Buona or its affiliates. Similarly, a default by the franchisee under any other agreement with Buona or its affiliates is considered a default under the Franchise Agreement. Additionally, a default by the guarantors of the Franchise Agreement or any other guaranty agreement is also considered a default of the Franchise Agreement. These agreements include, but are not limited to, any other Franchise Agreement or Area Developer Agreement.
If the Franchise Agreement is terminated due to a franchisee's default, Buona or its affiliates can choose to terminate any or all other agreements between the franchisee (or affiliate) and Buona or its affiliates. Conversely, if any other agreement between the franchisee (or affiliate) and Buona is terminated due to a franchisee's default, Buona can choose to terminate the Franchise Agreement. An incurable or uncured default under the Franchise Agreement or any other agreement between the franchisee (or affiliate) and Buona will result in the termination of the Franchise Agreement and/or all agreements between the franchisee (or affiliate) and Buona without additional notice or opportunity to cure.
Furthermore, any agreement between the franchisee and Buona or its affiliates relating to past due amounts, such as a promissory note, payment plan, or amendment to the Franchise Agreement (referred to as an "Arrearage Agreement"), is considered a material part of the Franchise Agreement and is incorporated by reference. A default under any Arrearage Agreement is considered a material default of the Franchise Agreement, regardless of the reason for the failure to pay the amount subject to the Arrearage Agreement. The FDD does not specifically state that the termination of a lease constitutes a default, but it does state that if the franchisee loses its right to possess the premises of the Franchised Business so that the Franchised Business is no longer operating, Buona has no obligation to mediate before commencing litigation.