Under the Byrider agreement, can a franchisee's failure to meet obligations to Byrider's affiliates be considered a default under the franchise agreement?

According to Byrider's 2025 Franchise Disclosure Document, a franchisee's failure to meet obligations to Byrider or its affiliates can indeed be considered a default under the franchise agreement. Specifically, the cross-default provision in Section 16.4 of the agreement stipulates that any default by the franchisee (or any person/company affiliated with the franchisee) under any agreement with Byrider (or any of its affiliates) can be regarded as a default under the franchise agreement itself. This includes, but is not limited to, other franchise agreements or any obligation to Byrider or its affiliates. This provision also applies if a person or company affiliated with the franchisee defaults on an agreement with Byrider or its affiliates.

This cross-default clause has significant implications for prospective Byrider franchisees. It means that if a franchisee has multiple agreements with Byrider or its affiliates (such as separate franchise agreements for different locations or financing agreements), a default under one agreement can trigger a default under all agreements. This could lead to the termination of all franchise agreements and the loss of all Byrider businesses, even if the other businesses are otherwise performing well. The franchisee's obligations extend not only to Byrider Franchising Partners, LLC, but also to its successors and assigns, as detailed in the Personal Guaranty and Assumption of Franchisee's Obligations exhibit.

For example, if a franchisee has two Byrider locations and defaults on payments for one location, Byrider could consider this a default under the franchise agreement for the other location as well, even if that second location is profitable and up-to-date on its payments. This provision gives Byrider a broad right to declare a default and pursue remedies, which may include terminating the franchise agreement and taking possession of the business. Prospective franchisees should carefully consider the potential risks associated with this cross-default provision and seek legal counsel to fully understand its implications before signing the franchise agreement.

It is important for potential franchisees to fully understand all agreements and obligations with Byrider and its affiliates to avoid triggering cross-default provisions. Franchisees should maintain open communication with Byrider and its affiliates to address any potential issues promptly and seek clarification on any terms or conditions that are unclear. Understanding the full scope of the cross-default clause is crucial for managing risk and ensuring the long-term success of a Byrider franchise.