factual

What obligations survive the termination or expiration of the Chocolate Bash franchise agreement?

Chocolate_Bash Franchise · 2024 FDD

Answer from 2024 FDD Document

eement); or

  • (xiii) Franchisee or any Owner is accused by any governmental authority or third party of any act that in CB Franchising's opinion is reasonably likely to materially and unfavorably affect the Chocolate Bash brand, or is charged with, pleads guilty to, or is convicted of a felony.
  • 14.3 Effect of Termination. Upon termination or expiration of this Agreement, all obligations that by their terms or by reasonable implication survive termination, including those pertaining to non-competition, confidentiality, indemnity, and dispute resolution, will remain in effect, and Franchisee must immediately:
    • (i) pay all amounts owed to CB Franchising based on the operation of the Business through the effective date of termination or expiration;
    • (ii) return to CB Franchising all copies of the Manual, Confidential Information and any and all other materials provided by CB Franchising to Franchisee or created by a third party for Franchisee relating to the operation of the Business, and all items containing any Marks, copyrights, and other proprietary items; and delete all Confidential Information and proprietary materials from electronic devices;
    • (iii) notify the telephone, internet, email, electronic network, directory, and listing entities of the termination or expiration of Franchisee's right to use any numbers, addresses, domain names, locators, directories and listings associated with any of the Marks, and authorize their transfer to CB Franchising or any new franchisee as may be directed by CB Franchising, and Franchisee hereby irrevocably appoints CB Franchising, with full power of substitution, as its true and lawful attorney-infact, which appointment is coupled with an interest; to execute such directions and authorizations as may be necessary or appropriate to accomplish the foregoing; and
    • (iv) cease doing business under any of the Marks.
  • 14.4 Remove Identification. Within 30 days after termination or expiration, Franchisee shall at its own expense "de-identify" the Location so that it no longer contains the Marks, signage, or any trade dress of a Chocolate Bash business, to the reasonable satisfaction of CB Franchising. Franchisee shall comply with any reasonable instructions and procedures of CB Franchising for de-identification. If Franchisee fails to do so within 30 days after this Agreement expires or is terminated, CB Franchising may enter the Location to remove the Marks and de-identify the Location. In this event, CB Franchising will not be charged with trespass nor be accountable or required to pay for any assets removed or altered, or for any damage caused by CB Franchising.

14.5 Liquidated Damages. If CB Franchising terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 14.1), then within 10 days thereafter Franchisee shall pay to CB Franchising a lump sum (as liquidated damages and not as a penalty) calculated as follows: (x) the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to CB Franchising under this Agreement for the [52-week] period preceding the effective date of termination; multiplied by (y) the lesser of (1) [104] or (2) the number of weeks remaining in the then-current term of this Agreement. If Franchisee had not operated the Business for at least 52 weeks, then (x) will equal the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to CB Franchising during the period that Franchisee operated the Business. Franchisee acknowledges that a precise calculation of the full extent of CB Franchising's damages under these circumstances is difficult to determine and the method of calculation of such damages as set forth in this Section is reasonable. Franchisee's payment to CB Franchising under this Section will be in lieu of any direct monetary damages that CB Franchising may incur as a result of CB Franchising's loss of Royalty Fees and Marketing Fund Contributions that would have been owed to CB Franchising after the date of termination;

Source: Item 22 — CONTRACTS (FDD pages 38–39)

What This Means (2024 FDD)

According to Chocolate Bash's 2024 Franchise Disclosure Document, several obligations remain in effect even after the franchise agreement terminates or expires. These include obligations related to non-competition, confidentiality, indemnity, and dispute resolution, which continue as specified in the agreement.

Specifically, upon termination or expiration, the franchisee must pay all outstanding amounts owed to Chocolate Bash. The franchisee is also required to return all copies of the Manual, Confidential Information, and any materials related to the business operation that Chocolate Bash provided or were created for the franchisee. This includes deleting all Confidential Information and proprietary materials from electronic devices. The franchisee must also notify relevant entities about the termination or expiration of their right to use any numbers, addresses, domain names, or listings associated with Chocolate Bash's trademarks, and authorize the transfer of these to Chocolate Bash or a new franchisee.

Within 30 days of termination or expiration, the franchisee is responsible for de-identifying the location, removing all Chocolate Bash marks, signage, and trade dress to Chocolate Bash's satisfaction. If the franchisee fails to do so, Chocolate Bash has the right to enter the location to remove the marks and de-identify it, without being held liable for trespass or any damages caused during the process. Additionally, for one year after termination, transfer, or expiration of the agreement, the franchisee cannot knowingly employ or seek to employ anyone currently working for Chocolate Bash or its affiliates.

For franchisees in California, if the termination results from the franchisee's default, they must pay Chocolate Bash a lump sum as liquidated damages. This amount is equal to the total Royalty Fee payments for either the 24 months preceding the default, a projected 24-month period if the operation was shorter, or any shorter period that equals the unexpired term at the time of termination. This payment does not exclude Chocolate Bash from pursuing other remedies, including attorneys' fees and costs.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.