Under the Buona franchise agreement, is a default under an Arrearage Agreement considered a material default?
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 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a default under any Arrearage Agreement is considered a material default of the Franchise Agreement. An Arrearage Agreement is defined as any agreement between the franchisee and Buona or its affiliates relating to past due amounts. This includes, but is not limited to, any promissory note, payment plan, or amendment to the Franchise Agreement.
This means that if a Buona franchisee fails to meet the payment terms outlined in an Arrearage Agreement, regardless of the reason for the failure, it will be considered a significant breach of the Franchise Agreement. This can have serious consequences, potentially leading to termination of the agreement.
Buona retains the right to not waive any payments or enter into any Arrearage Agreement. However, if Buona does enter into an Arrearage Agreement with a franchisee, the franchisee must understand the serious implications of defaulting on that agreement. Franchisees should carefully consider their ability to meet the terms of any Arrearage Agreement before entering into one with Buona.