What constitutes a material event of default under the C3 Wellness Spa Franchise Agreement?
C3_Wellness_Spa Franchise · 2024 FDDAnswer from 2024 FDD Document
f default set forth in this Article 16.A.(3) shall exclude events of default that are otherwise governed by and/or constitute events of default under Article 16.A.(1) or Article 16.A.(2). In the event of any inconsistency or conflict between the provisions of this Article 16.A.(3) with Article 16.A.(1), Article 16.A.(1) shall take precedence and govern. In the event of any inconsistency or conflict between the provisions of this Article 16.A.(3) with Article 16.A.(2), Article 16.A.(2) shall take precedence and govern.
- (4) Defaults and Automatic Termination After 30 Day Cure Period Franchisee shall be in default of this Agreement and, this Agreement shall be terminated, upon the occurrence of any one or more of the following actions, inactions, omissions, events, and/or circumstances, unless, Franchisee timely cures, to the satisfaction of Franchisor, such default / action, inaction, omission, event, and/or circumstance within 30 calendar days of Franchisor's written notice:
- (a) Franchisee fails or refuses to comply with and/or breaches any term, condition, provision, and/or requirement of this Agreement that is not otherwise a default under Articles 16.A.(1), 16.A.(2), or 16.A.(3) of this Agreement;
- (b) Franchisee fails or refuses to comply with and/or breaches any term, condition, provision, and/or requirement of any agreement, other than this Agreement, between Franchisor and Franchisee, and/or an affiliate of Franchisor and Franchisee;
- (c) Franchisee fails or refuses, in accordance with the terms of this Agreement, to obtain and secure a signed lease agreement or fee simple ownership interest as to a Franchisor approved Spa Location;
- (d) Franchisee fails or refuses to develop and open the Franchised Business on or before the Scheduled Business Commencement Date, in compliance with the terms of this Agreement, as
designated or specified in the Operations Manual, and/or in accordance with Franchisor's standards and specifications as communicated to Franchisee from time to time;
- (e) Franchisee fails or refuses, at any time, to manage, maintain, and/or operate the Franchised Business in compliance with the terms of this Agreement, as designated or specified in the Operations Manual, and/or in accordance with Franchisor's standards, specifications, and requirements as communicated to Franchisee from time to time;
- (f) Franchisee fails or refuses, at any time, to develop, manage, maintain, and/or operate the Franchised Business in compliance with all applicable federal, state, and local laws, rules, regulations, ordinances, permits, and codes;
- (g) At any time, an inspection and/or evaluation of the operations of the Franchised Business whether by mystery shopper programs, third party inspection services, or as otherwise designated by Franchisor, and, whether or not such inspections are on notice or secret – Franchisor, in Franchisor's Reasonable Business Judgment, determines that the operations of the Franchised Business do not meet or are in violation of the operational standards and requirements set forth in this Agreement, the Operations Manual, and/or as communicated to Franchisee from time to time;
Source: Item 23 — RECEIPTS (FDD pages 59–293)
What This Means (2024 FDD)
According to the 2024 C3 Wellness Spa Franchise Disclosure Document, several actions or inactions can lead to a default of the franchise agreement. These include failing to comply with the terms of the agreement or any other agreement between the franchisee and C3 Wellness Spa or its affiliates. Failing to secure a lease agreement or ownership interest for an approved spa location, or not opening the franchised business by the scheduled commencement date, also constitute default.
Other events of default include transferring franchise rights without approval, attempting to transfer ownership interests in the franchise (if the franchisee is a corporate entity) without approval, or disclosing confidential information from the Operations Manual to unauthorized third parties. Engaging in activities that harm C3 Wellness Spa's brand or reputation, breaching an ancillary agreement (like a Franchise Owner and Spouse Agreement), being convicted of a felony, or engaging in intentionally dishonest conduct that embarrasses the brand are also considered defaults.
C3 Wellness Spa provides a 30-day cure period for certain defaults after written notice, allowing the franchisee to rectify the situation. However, the document specifies that the cure period does not apply to all default scenarios, as some defaults may trigger immediate termination as outlined in other sections of the agreement. A prospective franchisee should carefully review the entire franchise agreement, including Articles 16.A.(1), 16.A.(2), and 16.A.(3), to fully understand the implications of each type of default and the specific cure provisions that apply.