Can a Burros Fries franchise agreement be terminated for failing to maintain an 'A' rating on health department inspections?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
see must maintain an "A" rating or above for all health department inspections and failure to do so may result in termination as described in Section 23.C of this Agreement.
In addition, with respect to all credit card transactions and guest information obtained through credit card usage, Franchisee agrees to diligently comply with all laws and rules regarding such usage and Franchisee will protect the privacy of credit card users. Franchisee must be at all times in compliance with the Payment Card Industry Data Security Standards ("PCI Compliant"). Copies of any and all notices, inspection reports or other communication from any governmental entity with respect to the conduct your Business which indicates the Franchisee's failure to meet or maintain governmental standards, or less than substantial compliance by the Franchisee with any applicable law, rule or regulation, shall be forwarded to us within five (5) days of the Franchisee's receipt thereof. Franchisee agreesto indemnify us under Section 18 of this Agreement which includes any claims arising out of Franchisee's failure to perform its obligations as described above.
It is Franchisee's sole responsibility and absolute obligation to research all applicable federal, state and local laws and regulations governing the operation of a Burros & Fries Business. Franchisee must secure and maintain in force all required licenses, permits and certificates relating to the operation of its Business and must at all times operate it in full compliance with all applicable laws, ordinances and regulations (including without limitation, regulations relating to fictitious name registrations, sales tax permits, fire clearances, safety, truth in advertising, occupational hazards, indoor air quality, health, laws relating to non-discrimination in hiring and accessibility, worker's compensation and unemployment insurance). In addition, Franchisee must comply with consumer protection laws and regulations concerning food preparation, handling and storage, "Truth in Menu" concerning menu item names, product content, labeling and nutritional claims. We make no representations or assurances as to what inspections, licenses, permits, authorizations or otherwise will be required for Franchisee in the Franchisee's area in connection with its Business. It is Franchisee's sole responsibility to identify and obtain all licenses,
permits, certifications and authorizations necessary for operation. Franchisee agrees to maintain high standards of honesty, integrity, fair dealing and ethical conduct in all business activities.
Franchisee shall agree to comply and/or assist us in our compliance efforts, as applicable, with any and all laws, regulations, Executive Orders or otherwise relating to antiterrorist activities, including without limitation the U.S. Patriot Act, Executive Order 13224 and related U.S. Treasury and/or other regulations. In connection with such compliance efforts, Franchisee agrees not to enter into any prohibited transactions and to properly perform any currency reporting and other activities relating to the Franchise Business as may be required by law.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to the 2024 Burros Fries Franchise Disclosure Document, while it doesn't specifically state that failing to maintain an 'A' rating on health department inspections is grounds for termination, it does emphasize the franchisee's responsibility to comply with all applicable laws and regulations. The franchisee must secure and maintain all required licenses, permits, and certificates and operate the business in full compliance with all applicable laws, ordinances, and regulations, including health regulations.
The FDD states that copies of any notices, inspection reports, or other communication from any governmental entity indicating the franchisee's failure to meet or maintain governmental standards, or less than substantial compliance with any applicable law, rule, or regulation, must be forwarded to Burros Fries within five days of receipt. This suggests that failing to meet health standards could lead to further action from Burros Fries.
Furthermore, the agreement states that in the event of a breach, Burros Fries would be irreparably injured and be without an adequate remedy at law and is entitled to enforce the agreement, including the right to terminate the Franchise Agreement. Because maintaining required health standards is a requirement of the franchise agreement, failure to do so could be considered a breach of contract, allowing Burros Fries to pursue termination. A prospective franchisee should clarify with Burros Fries the specific consequences of failing to maintain an 'A' rating or otherwise failing to meet health department standards.