Does the Chem Dry Franchise Disclosure Document contain all the agreements related to renewal, termination, transfer and dispute resolution?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
[Item 17: RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION]
This table lists certain important provisions of the franchise and related agreements. You should read these provisions in the agreements attached to this disclosure document.
THE FRANCHISE RELATIONSHIP
| Provision | Section in Franchise Agreement and other agreements | Summary |
|---|---|---|
| a. Term of the franchise | Section 1C the | The term is 5 years. CDI may offer a ten- |
| Franchise Agreement, | year franchise agreement when business | |
| Section 9 of | purposes warrant. Certain restrictions | |
| Equipment Agreement | apply. | |
| b. Renewal or extension of | Section 14 | You may acquire a five-year successor |
| the term | term, if you meet certain qualifications. | |
| i. | Section | Pay |
| Your | 16 | outstanding |
| obligations | of | amounts, |
| on | the | de |
| termination/nonrenewal | Franchise Agreement, | identification, and return of confidential |
| Section 9 of the | information, telephone numbers, | |
| Equipment Agreement | customer lists, proprietary equipment | |
| and Section 13 of the | and operating manuals (see also "s.") | |
| Software | ||
| License | ||
| Agreement | ||
| k. "Transfer" by you – | Section 13B of the | Includes transfer of equity, the Franchise |
| definition | Franchise Agreement, | Agreement or the Business assets |
| l. CDI's approval of | Section 13B | We have the right to approve all |
| transfer by you | transfers, | |
| m. Conditions for CDI's approval of transfer | Section 13C | Transferee qualifies, transferee assumes all obligations, all amounts due are paid |
| r. Non-competition covenants after the franchise is | Section 16D | No competing business for 2 years within Franchised Area or 10 miles of |
| terminated or expires | Franchised Area. No franchising, licensing, manufacturing, or selling similar products, equipment, or services for 2 years within Franchised Area or any Chem-Dry Business franchised area. | |
| u. Dispute resolution by | Section 17F of the | Except for certain claims, all disputes |
| arbitration or mediation | Franchise Agreement | must be arbitrated in Nashville, |
| and the Business Note | Tennessee (subject to state law). In reliance on the Federal Arbitration Act, CDI maintains its right to enforce the arbitration provision, including the Tennessee forum selection provision, in | |
| v. Choice of forum | Section 17I | Litigation in Tennessee (subject to state |
| law) | ||
| w. Choice of law | Section 17H | Tennessee law applies (subject to state |
| law); Monetary claims for liquidated | ||
| amounts may be asserted in litigation | ||
| instead of arbitration by either you or us. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 51–55)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, Item 17 provides a summary of important provisions related to renewal, termination, transfer, and dispute resolution within the franchise and related agreements. The FDD itself states that prospective franchisees should read the provisions in the agreements attached to the disclosure document.
The document outlines the initial term of the franchise agreement, which is generally 5 years, although Chem Dry may offer a ten-year agreement under certain business conditions. Franchisees have the option to acquire a five-year successor term if they meet specific qualifications. The FDD also details conditions for the transfer of the franchise, including obtaining Chem Dry's approval, which will not be unreasonably withheld, and ensuring the transferee meets certain qualifications, such as completing training and signing the current franchise agreement.
Regarding termination, the FDD lists various obligations of the franchisee upon termination or non-renewal, such as paying outstanding amounts, returning confidential information, and ceasing use of proprietary materials. In the event of a dispute, the FDD specifies that, with certain exceptions, disputes must be resolved through arbitration in Nashville, Tennessee, and are subject to Tennessee law. However, monetary claims for liquidated amounts may be pursued through litigation instead of arbitration by either the franchisee or Chem Dry.
The Chem Dry FDD also addresses non-competition covenants, both during the franchise term and after termination or expiration. During the franchise term, franchisees cannot have an interest in or perform services for a competitive business. After termination or expiration, franchisees are restricted from engaging in a competing business for two years within the franchised area or within 10 miles of the franchised area. These provisions collectively govern the franchise relationship and should be carefully reviewed by potential franchisees.