Under the Buona franchise agreement, what is the franchisee's obligation regarding compliance with the agreement's requirements when the franchisor operates the business due to default?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee acknowledges and agrees that Franchisor's agent or other representative designated by Franchisor may take over, control and operate the Franchised Business, that Franchisee shall pay Franchisor the then-current published fee for such management service, plus all travel expenses, room and board and other expenses reasonably incurred by such agent or representative so long as it shall be required to enforce compliance with this Agreement.
Franchisee further acknowledges that if Franchisor temporarily operates the Franchised Business on Franchisee's behalf under this Paragraph 16.8, Franchisee will indemnify and hold harmless Franchisor and Franchisor's agent or representative respecting any and all claims arising out of Franchisor's operation of the Franchised Business under this Paragraph 16.8.
Nothing herein shall require Franchisor to operate the Franchised Business when Franchisee is in default.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, if a franchisee defaults on the franchise agreement, Buona has the option to take over and operate the franchised business. In such a case, the franchisee is obligated to ensure compliance with the agreement. Specifically, the franchisee must pay Buona the current published fee for the management service, in addition to covering all travel expenses, room and board, and other expenses reasonably incurred by Buona's agent or representative. This obligation remains in effect as long as it is required to enforce compliance with the agreement.
Furthermore, the Buona franchisee is required to indemnify and hold harmless Buona and its representatives from any claims arising out of Buona's operation of the franchised business during this period. This means the franchisee is responsible for protecting Buona from any legal or financial liabilities that may occur while Buona is managing the business due to the franchisee's default. However, the FDD clarifies that Buona is not required to operate the franchised business even if the franchisee is in default; it is Buona's option.
This clause in the Buona franchise agreement ensures that the brand's standards and operations are maintained even when a franchisee is unable to manage the business effectively. It also protects Buona from potential liabilities arising from operating a defaulted franchise. For a prospective franchisee, this highlights the importance of adhering to the franchise agreement to avoid default and the associated costs and loss of control over their business.