Is a Chocolate Bash franchisee's bankruptcy considered a non-curable default?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in franchise | Summary |
|---|---|---|
| or other agreement | ||
| 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, a franchisee's bankruptcy is considered a non-curable default. This means that if a Chocolate Bash franchisee declares bankruptcy, Chocolate Bash has grounds to terminate the franchise agreement without providing an opportunity for the franchisee to correct the situation.
This policy has significant implications for prospective franchisees. Because bankruptcy is listed as a non-curable default, Chocolate Bash does not have to give the franchisee any time to resolve the bankruptcy before terminating the agreement. This differs from curable defaults, such as non-payment, where the franchisee has a specified period (e.g., 10 days for non-payment) to remedy the breach.
It is important for potential Chocolate Bash franchisees to understand the ramifications of this clause. Bankruptcy can arise from various unforeseen circumstances, and this provision means the franchisee risks losing their franchise immediately without recourse if such a situation occurs. Prospective franchisees should carefully consider their financial stability and risk tolerance before entering into an agreement with Chocolate Bash, and perhaps consult with a legal professional.