Does CB Franchising have to actually terminate a franchise agreement for a Chocolate Bash MUDA to be terminated?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
- 4. Default and Termination. CB Franchising may terminate this MUDA by giving notice to Franchisee, without opportunity to cure, if any of the following occur:
- (i) Franchisee fails to satisfy the development schedule; or
- (ii) CB Franchising has the right to terminate any franchise agreement between CB Franchising and Franchisee (or any affiliate thereof) due to Franchisee's default thereunder (whether or not CB Franchising actually terminates such franchise agreement).
- 5. Limitation of Liability. Franchisee's commitment to develop Chocolate Bash businesses is in the nature of an option only. If CB Franchising terminates this MUDA for Franchisee's default, Franchisee shall not be liable to CB Franchising for lost future revenues or profits from the unopened Chocolate Bash businesses. Franchisee may terminate this MUDA at any time.
Source: Item 23 — RECEIPTS (FDD pages 39–101)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, CB Franchising does not necessarily have to terminate a franchise agreement for a Multi-Unit Development Agreement (MUDA) to be terminated. The MUDA can be terminated if CB Franchising has the right to terminate any franchise agreement between them and the franchisee (or any affiliate) due to the franchisee's default, regardless of whether CB Franchising actually terminates the franchise agreement.
This means that even if Chocolate Bash chooses not to formally terminate a franchise agreement, the existence of grounds for termination is sufficient for them to terminate the MUDA. This protects Chocolate Bash by allowing them to end the development agreement if a franchisee is in serious breach of their franchise obligations, even if they haven't yet taken the step of ending the franchise agreement itself.
This condition is in addition to other reasons CB Franchising may terminate the MUDA, such as the franchisee failing to satisfy the development schedule. The franchisee also has the option to terminate the MUDA at any time. If CB Franchising terminates the MUDA for the franchisee's default, the franchisee will not be liable to CB Franchising for lost future revenues or profits from the unopened Chocolate Bash businesses.