Is conviction of a felony considered a non-curable default for a Chocolate Bash franchise?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in franchise | Summary |
|---|---|---|
| h. “Cause” defined--non- | FA: § 14.2 | FA: Misrepresentation when applying to be a |
| curable defaults | ||
| MUDA: § 4 | franchisee; knowingly submitting false information; bankruptcy; lose possession of your location; violation of law; violation of confidentiality; violation of non-compete; violation of transfer restrictions; slander or libel of us; refusal to cooperate with our business inspection; cease operations for more than 5 consecutive days; three defaults in 12 months; cross-termination; conviction of a felony, or accusation of an act that is reasonably likely to materially and unfavorably affect our brand; any other breach of franchise agreement which by its nature cannot be cured. MUDA: failure to meet development schedule; violation of franchise agreement or other agreement which gives us the right to terminate it. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 30–34)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, conviction of a felony is considered a non-curable default that allows Chocolate Bash to terminate the franchise agreement. This means that if a franchisee is convicted of a felony, Chocolate Bash has grounds to terminate the agreement immediately without providing an opportunity to cure the default. Additionally, even an accusation of an act that is reasonably likely to materially and unfavorably affect their brand can be considered a non-curable default.
This provision is included in the Franchise Agreement (FA) under Section 14.2 and in the Multi-Unit Development Agreement (MUDA) under Section 4. Other non-curable defaults include misrepresentation when applying to be a franchisee, knowingly submitting false information, bankruptcy, losing possession of your location, violation of law, violation of confidentiality, violation of non-compete, violation of transfer restrictions, slander or libel of Chocolate Bash, refusal to cooperate with their business inspection, ceasing operations for more than 5 consecutive days, three defaults in 12 months, and cross-termination. For MUDA agreements, failure to meet the development schedule or violation of the franchise agreement also constitute non-curable defaults.
For a prospective Chocolate Bash franchisee, this clause highlights the importance of maintaining a clean criminal record and adhering to all legal and ethical standards. A felony conviction can have severe consequences, leading to the termination of the franchise agreement and the loss of the business. The inclusion of 'accusation of an act' introduces a degree of subjectivity, as Chocolate Bash determines what could materially and unfavorably affect their brand. Franchisees should be aware of these terms and understand the potential risks associated with such defaults.
It is common practice in the franchise industry to include clauses that allow for termination in the event of a felony conviction or other serious misconduct. This protects the brand's reputation and ensures that franchisees operate within legal and ethical boundaries. However, the specific terms and conditions can vary from franchise to franchise, so it is essential for prospective franchisees to carefully review the franchise agreement and seek legal advice if needed.