Under what conditions does the right to open Buona Restaurants automatically terminate without notice or opportunity to cure?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
or similar to, those offered by a Buona Restaurant. (The ownership of five percent (5%) or less of a publicly traded Franchisor will not be deemed to be prohibited by this paragraph.) Further, during the term of this Agreement, you will not (1) divert customers or business from any Buona Restaurants to any other business or (2) hire any employees of ours or our affiliates.
7. DEFAULT AND TERMINATION
- 7.1 The right to open Buona Restaurants has been granted in reliance on your representations and warranties, and strictly on the conditions set forth in this Development Agreement including, without limitation, the condition that you comply strictly with the Development Schedule.
- 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, the development agreement outlines specific conditions that can lead to an automatic termination of a franchisee's rights to open Buona restaurants, without prior notice or an opportunity to rectify the situation. These conditions primarily revolve around financial instability, legal issues, or the dissolution of the franchisee's business entity.
Specifically, the agreement terminates automatically if the franchisee is declared bankrupt or insolvent, takes actions indicating insolvency, or files for insolvency. Similarly, the rights terminate if a receiver is appointed for the franchisee's property, or if the franchisee makes a general assignment for the benefit of creditors. A final judgment against the franchisee's business assets that remains unpaid for 30 days or more, unless a supersedeas bond is filed, also triggers automatic termination. The same occurs if a levy of execution is placed against the business or property.
Furthermore, if a lawsuit to foreclose on any lien or mortgage against the franchisee's premises or business assets is instituted and not dismissed within 30 days, or is not in the process of being dismissed, the agreement can be terminated. The dissolution of the franchisee's business entity or the death of one or more of the owners also results in automatic termination. Additionally, if the developer, or any of its shareholders, members, managers, partners, officers, directors or guarantors, is indicted for, convicted of, or pleads guilty to a felony, a crime involving moral turpitude, or any other crime or offense that Buona believes is reasonably likely to have an adverse effect on the System, the Marks, or the goodwill associated with the System and the Marks, or Buona's interest in the System or the Marks, the agreement will automatically terminate. These stipulations highlight the critical importance of maintaining financial stability and legal compliance for Buona franchisees to avoid losing their development rights.