Does the MUDA create an obligation for the Chocolate Bash franchisee to open additional locations?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
1. Multi-Unit Commitment.
(a) Development Schedule; Fee. Franchisee shall develop and open Chocolate Bash businesses on the following schedule:
- 4. Default and Termination. CB Franchising may terminate this MUDA by giving notice to Franchisee, without opportunity to cure, if any of the following occur:
- (i) Franchisee fails to satisfy the development schedule; or
- (ii) CB Franchising has the right to terminate any franchise agreement between CB Franchising and Franchisee (or any affiliate thereof) due to Franchisee's default thereunder (whether or not CB Franchising actually terminates such franchise agreement).
- 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 Chocolate Bash's 2024 Franchise Disclosure Document, the Multi-Unit Development Agreement (MUDA) does create a commitment for the franchisee to develop and open multiple Chocolate Bash businesses according to a specified schedule. The franchisee and Chocolate Bash desire that the franchisee develop multiple Chocolate Bash businesses.
However, the document also states that the franchisee's commitment is "in the nature of an option only." This means that while there is an agreed-upon development schedule, Chocolate Bash will not hold the franchisee liable for lost future revenues or profits if the MUDA is terminated due to the franchisee's default. The franchisee also has the option to terminate the MUDA at any time.
Chocolate Bash can terminate the MUDA if the franchisee fails to meet the development schedule or if Chocolate Bash has the right to terminate any other franchise agreement with the franchisee due to default. The franchisee's right to develop additional Chocolate Bash franchises after the first store is contingent upon having sufficient financial and organizational capacity, as determined by Chocolate Bash, and being in full compliance with brand requirements at existing locations, without any defaults on other agreements with Chocolate Bash.