Under what conditions does the Development Agreement for Buona automatically terminate without notice or opportunity to cure?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
- 7.2 You shall be in default under this Agreement, and all rights granted herein to you shall automatically terminate without notice or an opportunity to cure if:
- (a) you are adjudicated bankrupt, become insolvent, commits any affirmative action of insolvency or files any action or petition of insolvency, or if a receiver (permanent or temporary) of your property or any part thereof is appointed by a court of competent authority, or if you make a general assignment for the benefit of its creditors;
- (b) if a final judgment against your business assets remains unsatisfied of record for thirty (30) days or longer (unless supersedeas bond is filed);
- (c) if execution is levied against your business or property;
- (d) if suit to foreclose any lien or mortgage against Developer's premises or business assets is instituted against you and not dismissed within thirty (30) days, or is not in the process of being dismissed; provided, however, that Franchisor reserves the right to be named as trustee or receiver in any voluntary petition for bankruptcy or insolvency filed by you;
- (e) upon the dissolution of the entity that is Developer is dissolved, or upon the death of one or more of your Owners;
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, there are specific conditions under which the Development Agreement can automatically terminate without notice or an opportunity to cure. These conditions primarily relate to the developer's financial stability, legal standing, and the composition of their ownership.
Specifically, the Development Agreement with Buona will automatically terminate if the developer is adjudicated bankrupt, becomes insolvent, commits an act of insolvency, or files for insolvency. Similarly, the appointment of a receiver for the developer's property can trigger automatic termination. A final judgment against the developer's business assets that remains unsatisfied for 30 days or longer, or if execution is levied against the business or property, also constitutes grounds for automatic termination. Additionally, if a suit to foreclose any lien or mortgage against the developer's premises or business assets is instituted and not dismissed within 30 days, the agreement can be terminated without notice. The dissolution of the developer entity or the death of one or more of the owners also results in automatic termination.
These terms are fairly standard in franchise agreements, as franchisors need to protect their brand and system from developers facing severe financial or legal issues. The lack of a cure period in these specific instances underscores the severity of these situations from Buona's perspective. Prospective developers should carefully consider these conditions and ensure they have a solid financial and legal foundation before entering into a Development Agreement with Buona.