Under the Buona franchise agreement, is an Arrearage Agreement considered a material part of the agreement?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, an Arrearage Agreement between a franchisee and Buona or its affiliates, which relates to past due amounts, is considered a material part of the Franchise Agreement. This includes any promissory note, payment plan, or amendment to the agreement related to these past due amounts. The Arrearage Agreement is incorporated into the Franchise Agreement by reference.
This means that if a franchisee enters into an Arrearage Agreement with Buona to address past due payments, that agreement becomes an integral part of the overall Franchise Agreement. Consequently, any failure to comply with the terms of the Arrearage Agreement constitutes a material default under the Franchise Agreement.
Buona emphasizes that a default under any Arrearage Agreement is a material default, regardless of why the franchisee fails to make the required payments. However, the FDD also clarifies that Buona is not obligated to waive any payments or enter into any Arrearage Agreement in the first place, giving them discretion in how they handle past-due situations with franchisees. This clause strengthens Buona's position by ensuring strict adherence to payment obligations once an Arrearage Agreement is in place.