What are the specific obligations of a Byrider franchisee regarding compliance with laws and regulations (as implied by obligations in Item 9) and how does this relate to the litigation history of Byrider's predecessor (Item 3)?
Byrider Franchise · 2025 FDDAnswer from 2025 FDD Document
to apply any payments by the Franchisee to any past due indebtedness of the Franchisee for Royalty Fees, Advertising Fees, purchases from the Company, interest or any other indebtedness of the Franchisee. If the Company shall apply any payment by the Franchisee in a manner different from the application intended by the Franchisee, the Company shall give Franchisee written notice of how such payment was applied.
- 9.4 Technology System Fees. Concurrently with the execution of this Agreement, Franchisee has executed the Byrider Software Services and User Agreement which is attached hereto as Exhibit D (the "Software Agreement"). The Company's technology system is made up of four components: 1) Byrider Proprietary Software, 2) off-the-shelf software, 3) hardware, 4) Software as a Service (SaaS) platforms from third party providers as well as public cloud-based platforms, and 5) dealer management system with integrated mandatory Customer Relations Management provided at no additional cost to Franchisee. The Customer Relations Management assists with Agency and Direct Consumer Complaints. When Franchisee's franchised location receives an Agency Complaint (such as Better Business Bureau, Attorney General, Consumer Financial Protection Bureau, Media, or Private Attorney), Franchisee must investigate the complaint, forward the complaint to the Company's Customer Service, and timely respond to the Agency; when Franchisee's franchised location receives a Direct Consumer Complaint (i.e., Customer Service phone/email), Franchisee will investigate the complaint, resolve it directly, and timely report the results to Customer Service detailing the resolution or action taken. The Company's Compliance Department administers the Customer Service mailbox and phone line and tracks the complaints and responses. Franchisee is responsible for investigating, taking corrective action, and resolving these complaints. Franchisee must license and use the Byrider technology system necessary to operate day-to-day business. Franchisee must pay the cost of the technology system to the appropriate vendor as shown on Exhibit D, Appendix B, upon receiving invoices. Exhibit D, Appendix A, identifies the items that are typically required per franchised location. The Company may at times allow for substitution of items in Appendix A at the request of Franchisee if a substitution will not materially impact the Company's delivery of services or support but is under no obligation to do so.
- 9.5 Reputation Management Fee. Franchisee is required to pay to the Company for reputation management texts performed by the Company or its designee.
ARTICLE X
ADVERTISING AND PROMOTION
10.1 Advertising Fee. Franchisee shall contribute $2,450.00 for each Business Location each month to the Company used exclusively for the promotion and advertising of the business of all franchisees of the System. All Advertising Fee money goes toward franchisees (not the Company entity). At the Company's sole discretion, the Company may increase the monthly contribution, provided that the increase(s) will not exceed $400.00 in the aggregate during any twenty-four (24)-month period. All amounts received by the Company will become the exclusive property of the Company. The Company will hold such amounts for the benefit of the Company and all Franchisees and will be expended exclusively for the promotion and advertising of the business of the Company and all franchisees of the System and Marks, consistent with this Agreement, in such manner and amounts as determined by the Company, acting in its sole discretion, but within the limitations stated above.
What This Means (2025 FDD)
According to Byrider's 2025 Franchise Disclosure Document, franchisees have specific obligations to comply with laws and regulations, particularly concerning customer complaints and legal matters. Item 9.4 details the franchisee's responsibility to investigate and respond to both Agency Complaints (Better Business Bureau, Attorney General, Consumer Financial Protection Bureau, Media, or Private Attorney) and Direct Consumer Complaints. Franchisees must forward Agency Complaints to Byrider's Customer Service and report the resolution of Direct Consumer Complaints to Customer Service. Byrider's Compliance Department manages the Customer Service channels and tracks these complaints, but the franchisee is ultimately responsible for taking corrective action. This indicates that Byrider franchisees must be prepared to handle customer disputes and regulatory inquiries, ensuring they operate within legal and ethical boundaries. Franchisees are also required to license and use the Byrider technology system to manage day-to-day business, which includes the Customer Relations Management system to assist with handling complaints. This system is provided at no additional cost. Franchisees must also pay the cost of the technology system to the appropriate vendor as shown on Exhibit D, Appendix B, upon receiving invoices. Exhibit D, Appendix A, identifies the items that are typically required per franchised location.
Item 3 provides context on Byrider's litigation history, including actions against franchisees for breaches of franchise agreements. For example, in 2023, Byrider Franchising initiated arbitration against entities owned by Randall Barson for breach of contract. Additionally, Byrider Franchising was involved in a settlement agreement with the Bradford Parties, who initially asserted counterclaims including violations of Utah's Consumer Sales Practices Act. Although Byrider waived the second installment payment of $600,000, the initial settlement involved a payment of $900,000 from the Bradford Parties. The disclosure of these legal actions suggests that Byrider franchisees may face potential legal disputes, emphasizing the importance of compliance with all applicable laws and the franchise agreement terms.
The interplay between Item 3 and Item 9 highlights the importance of legal and regulatory compliance for Byrider franchisees. The litigation history indicates potential risks and disputes that franchisees might encounter, while the obligations outlined in Item 9 demonstrate the proactive measures franchisees must take to address customer complaints and regulatory inquiries. Prospective franchisees should carefully review these sections to understand their responsibilities and the potential legal landscape they may navigate as Byrider franchisees.