Can Buona require a minimum royalty during the period of non-operation due to premises damage?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) Franchisee at any time ceases to operate the Franchised Business for fortyeight (48) hours or more or otherwise abandons the Franchised Business, or loses the right to possession of the premises of the Franchised Business, or causes its lease for the premises of the Franchised Business to be terminated, or otherwise forfeits the right to do or transact business in the jurisdiction where the Franchised Business is located.
However, if, through no fault of Franchisee, the premises are damaged or destroyed by an event not within the control of Franchisee such that repairs or reconstruction cannot be completed within six (6) months thereafter, then Franchisee shall have thirty (30) days after such event in which to apply for Franchisor's approval to relocate the Franchised Business and/or reconstruct the premises, which approval shall not be unreasonably withheld, provided Franchisee is not then in default under this Agreement or any other agreement between Franchisee and Franchisor or any of its Affiliates, but may be conditioned upon the payment of an agreed minimum royalty to Franchisor during the period in which the Franchised Business is not in operation;
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, if a Buona restaurant's premises are damaged or destroyed through no fault of the franchisee, and repairs or reconstruction cannot be completed within six months, the franchisee has 30 days to apply for Buona's approval to relocate or reconstruct the premises.
Buona's approval for relocation or reconstruction will not be unreasonably withheld, provided the franchisee is not in default under the Franchise Agreement or any other agreement with Buona or its affiliates. However, Buona may condition its approval upon the payment of an agreed minimum royalty during the period in which the franchised business is not in operation.
This means that even if a Buona restaurant is temporarily closed due to circumstances outside the franchisee's control, Buona retains the right to require the franchisee to pay a minimum royalty fee during the downtime, as a condition of approving relocation or reconstruction. This is a point for potential franchisees to consider, as it could impact their financial obligations during unforeseen closures.