What happens if a C3 Wellness Spa franchisee fails to comply with the Development Schedule?
C3_Wellness_Spa Franchise · 2024 FDDAnswer from 2024 FDD Document
al estate for the Spa
Location for each respective Development Spa; or (c) six months prior to the date that each respective Development Spa must be open and in operation pursuant to the Development Schedule.
4.4 DEVELOPMENT SCHEDULE
Franchisee agrees that to induce Franchisor to enter into this Agreement, Franchisee agrees to develop, establish and operate Development Spas in strict accordance with the requirements of a development schedule (the "Development Schedule"). The Development Schedule, among other things, sets forth and defines each respective measurement period / measurement periods (each, respectively, a "Development Period") and the number of Development Spas that Franchisee must establish and open (a "Newly Opened Development Spa(s)") within the respective Development Period and, the minimum number of cumulative Development Spas (the "Cumulative Development Spas") that must be open and in operation as of the last day of each applicable Development Period.
The Development Schedule is set forth in the Development Information Sheet.
Franchisee agrees that, as to the Development Spas, Franchisee shall meet the requirements of the Development Schedule including, without limitation, requirements as to the number of Development Spas that must be timely developed, established, open, and in operation by Franchisee within the Development Area and as to each respective Development Period.
4.5 REASONABLENESS OF DEVELOPMENT SCHEDULE
Franchisee agrees and represents that it has conducted its own independent investigation and analysis of the prospects for the establishment of Spa Location Franchises within the Development Area, that Franchisee approves of the Development Schedule as being reasonable and viable, and that Franchisee recognizes that failure to achieve the results described in the Development Schedule will constitute a material breach of this Agreement with time being of the essence.
SECTION 5 OTHER OBLIGATIONS OF FRANCHISEE
5.1 EXECUTION OF FRANCHISE AGREEMENTS
For each C3 Wellness owned, developed and opened for business by the Franchisee in the Development Area, Franchisee must execute Franchisor's then current standard Franchise Agreement.
Source: Item 23 — RECEIPTS (FDD pages 59–293)
What This Means (2024 FDD)
According to C3 Wellness Spa's 2024 Franchise Disclosure Document, a franchisee's failure to comply with the Development Schedule constitutes grounds for immediate termination of the Multi-Unit Development Agreement. The Development Schedule outlines the required number of spas a franchisee must develop, establish, open, and operate within the Development Area during specific Development Periods. The franchisee acknowledges that meeting these requirements is essential and that failure to do so is a material breach of the agreement.
Specifically, the franchisor has the right to terminate the agreement without providing an opportunity to cure the default if the franchisee fails to meet the development obligations for any single Development Period. This includes failing to establish, open, and maintain the cumulative number of spa locations as per the Development Schedule. Additionally, the agreement will automatically end on the earlier of (a) the last day of the calendar month that the final Spa is required to be opened and operating under the Development Schedule, or (b) the day the final Spa is open.
Furthermore, the franchisee's compliance with the Development Schedule is tied to certain benefits, such as the waiver of the Development Spa Initial Franchise Fee for additional spas beyond the first one. To qualify for this waiver, the franchisee must not be in default of the Development Agreement, including the Development Schedule, and neither the franchisee nor their affiliates should be in default of any other agreement with the franchisor. This underscores the importance of adhering to the Development Schedule to maintain good standing and receive the financial benefits outlined in the agreement.
Prospective C3 Wellness Spa franchisees should carefully review the Development Schedule and assess their ability to meet the specified milestones. Failure to do so not only risks termination of the agreement and loss of development rights but also could result in losing the waived Development Spa Initial Franchise Fee for each additional spa.