Does CB Franchising's action to discontinue supplies to a defaulting Chocolate Bash franchisee constitute a breach of the agreement?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
ction to cure the default on behalf of Franchisee, without any liability to Franchisee. Franchisee shall reimburse CB Franchising for its costs and expenses (including the allocation of any internal costs) for such action, plus 10% as an administrative fee.
- 11.4 Right to Discontinue Supplies Upon Default. While Franchisee is in default or breach of this Agreement, CB Franchising may (i) require that Franchisee pay cash on delivery for products or services supplied by CB Franchising, (ii) stop selling or providing any products and services to Franchisee, and/or (iii) request any third-party vendors to not sell or provide products or services to Franchisee. No such action by CB Franchising shall be a breach or constructive termination of this Agreement, change in competitive circumstances or similarly characterized, and Franchisee shall not be relieved of any obligations under this Agreement because of any such action. Such rights of CB Franchising are in addition to any other right or remedy available to CB Franchising.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, CB Franchising has the right to discontinue supplies to a franchisee in default without it being considered a breach of the agreement. Specifically, if a Chocolate Bash franchisee is in default or breach of the Franchise Agreement, CB Franchising has the option to take certain actions. These actions include requiring the franchisee to pay cash on delivery for products or services, stopping the sale or provision of any products and services to the franchisee, and/or requesting third-party vendors to not sell or provide products or services to the franchisee.
This provision in the Franchise Agreement protects Chocolate Bash by allowing them to mitigate potential losses or damages that could arise from a franchisee's default. It also ensures that Chocolate Bash can maintain the standards and reputation of the brand by controlling the supply of products and services to franchisees who are not in compliance with the agreement. The franchisee is still responsible for fulfilling all obligations under the agreement, even if Chocolate Bash exercises its right to discontinue supplies.
For a prospective Chocolate Bash franchisee, this means that being in default of the Franchise Agreement can have significant consequences, including the disruption of their supply chain. This clause underscores the importance of adhering to the terms and conditions of the Franchise Agreement to avoid any interruption in the operation of the franchise. Furthermore, franchisees should be aware that CB Franchising can also seek reimbursement for costs and expenses incurred as a result of the default, plus an additional 10% administrative fee.