Who bears the risk of loss or damage to the Burros Fries Business?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
As between us and the Franchisee, the Franchisee shall bear the entire risk of any damage, loss, theft or destruction to the Business from any cause whatsoever or requisition of the Business by any governmental entity or the taking of title to the Business by eminent domain or otherwise (collectively, "Loss"). The Franchisee shall advise us in writing within ten (10) days of any such Loss. No such Loss shall relieve the Franchisee of the obligation to pay Royalty Fees and all other amounts owed hereunder. In the event of any such Loss, we, at our option, may: (a) if the Loss has not materially impaired the Business (in our reasonable Business Judgment), require that the Franchisee, upon our demand, place the Business in good condition and repair reasonably satisfactory to us as mentioned above; or (b) if the Loss has materially impaired the Business and it is substantially destroyed, (in our sole judgment), we may require the Franchisee to repair the existing Business or find an alternative location within the Territory within ninety (90) days or soonest possible timeframe according to Franchisee's lease. We may extend this period an additional thirty (30) days at our discretion and failure of Franchisee to comply may result in termination of this Agreement. Upon termination, the Franchisee must return to us the System (including
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to Burros Fries's 2024 Franchise Disclosure Document, the franchisee bears the entire risk of any damage, loss, theft, or destruction to the business from any cause. This also includes requisition of the business by any governmental entity or the taking of title to the business by eminent domain. The FDD stipulates that the franchisee must inform Burros Fries in writing within ten days of any such loss.
Even if a loss occurs, the franchisee is still obligated to pay royalty fees and all other amounts owed under the agreement. However, Burros Fries has the option to take action depending on the severity of the loss. If the loss has not materially impaired the business, Burros Fries may require the franchisee to restore the business to a satisfactory condition. If the loss has materially impaired the business and it is substantially destroyed, Burros Fries may require the franchisee to repair the existing business or find an alternative location within the territory within ninety days, with a possible extension of thirty days at Burros Fries's discretion. Failure to comply may result in termination of the agreement.
Upon termination due to loss, the franchisee must return all system materials to Burros Fries. Burros Fries has the first right of refusal to purchase all assets, but the purchase price will be reduced to account for the loss the franchisee incurred. This allocation of risk is typical in franchising, where the franchisee generally assumes responsibility for the business's physical assets and operational risks.