Is the Chocolate Bash franchisee's commitment to develop businesses considered an option?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
- 6. Conditions. Franchisee's right to develop each Chocolate Bash franchise after the Store #1 is subject to the following:
- (i) Franchisee must possess sufficient financial and organizational capacity to develop, open, operate, and manage each additional Chocolate Bash business, in the reasonable judgment of CB Franchising, and
- (ii) Franchisee must be in full compliance with all brand requirements at its open Chocolate Bash businesses, and not in default under any Franchise Agreement or any other agreement with CB Franchising.
Source: Item 23 — RECEIPTS (FDD pages 39–101)
What This Means (2024 FDD)
According to the 2024 Chocolate Bash Franchise Disclosure Document, a franchisee's commitment to develop multiple Chocolate Bash businesses under a Multi-Unit Development Agreement (MUDA) is considered an option. Specifically, if Chocolate Bash terminates the MUDA due to the franchisee's default, the franchisee will not be liable for lost future revenues or profits from unopened Chocolate Bash businesses. The franchisee also has the option to terminate the MUDA at any time.
However, the franchisee's right to develop each Chocolate Bash franchise after the first store is subject to certain conditions. The franchisee must demonstrate sufficient financial and organizational capacity to develop, open, operate, and manage each additional Chocolate Bash business, as determined by Chocolate Bash. Additionally, the franchisee must be in full compliance with all brand requirements at its open Chocolate Bash businesses and not be in default under any Franchise Agreement or any other agreement with Chocolate Bash.
It's important to note that while the development commitment is framed as an option with limited liability for unbuilt stores, Chocolate Bash can still terminate the MUDA if the development schedule isn't met or if the franchisee defaults on any franchise agreement. This highlights the importance of carefully considering the development schedule and ensuring the financial and operational capacity to meet the obligations.
Furthermore, upon execution of the MUDA, the franchisee must pay the total Initial Franchise Fee to Chocolate Bash, which is non-refundable. For each additional Chocolate Bash franchise, the franchisee must execute Chocolate Bash's then-current standard form of franchise agreement no later than three business days after leasing or acquiring a location. The MUDA itself does not grant the right to construct, open, or operate a Chocolate Bash business; a separate franchise agreement is required for each location.