Is cross-termination 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 the 2024 Franchise Disclosure Document, cross-termination is defined as a non-curable default in the Franchise Agreement for Chocolate Bash. This means that if cross-termination occurs, Chocolate Bash has the right to terminate the franchise agreement immediately without providing an opportunity for the franchisee to correct the issue.
Cross-termination typically refers to a situation where a breach or termination of one agreement (such as a Multi-Unit Development Agreement) automatically triggers the termination of another related agreement (such as the Franchise Agreement). This provision is significant because it can have serious consequences for the franchisee.
Specifically, under the terms of the Chocolate Bash franchise agreement, if the franchisee violates the franchise agreement, Chocolate Bash can terminate the MUDA. However, if the MUDA is terminated, it does not automatically give Chocolate Bash the right to terminate the franchise agreement. However, if the franchise agreement is terminated, Chocolate Bash has the right to terminate the MUDA. Franchisees should carefully review the definitions of 'cause' and the implications of cross-termination with legal counsel before signing the agreement.