Does Chocolate Fish Coffee's discontinuation of supplies to a franchisee in default constitute a breach of the agreement?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
- 11.4 Right to Discontinue Supplies Upon Default. While Franchisee is in default or breach of this Agreement, Chocolate Fish Franchising may (i) require that Franchisee pay cash on delivery for products or services supplied by Chocolate Fish Franchising, (ii) stop selling or providing any products and services to Franchisee, and/or (iii) request any third-party vendors to not sell or provide products or services to Franchisee.
No such action by Chocolate Fish Franchising shall be a breach or constructive termination of this Agreement, change in competitive circumstances or similarly characterized, and Franchisee shall not be relieved of any obligations under this Agreement because of any such action.
Source: Item 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to the 2024 Chocolate Fish Coffee Franchise Disclosure Document, Chocolate Fish Coffee has the right to discontinue supplies to a franchisee in default without it being considered a breach of the agreement. Specifically, if a franchisee is in default or breach of the Franchise Agreement, Chocolate Fish Coffee has the option to take certain actions. These actions include requiring the franchisee to pay cash on delivery for products or services, stopping the sale or provision of any products and services to the franchisee, and/or requesting third-party vendors to not sell or provide products or services to the franchisee.
This provision protects Chocolate Fish Coffee by allowing them to mitigate potential losses or damages resulting from a franchisee's default. It also ensures that Chocolate Fish Coffee can maintain the standards and reputation of the brand by controlling the supply of products and services to franchisees who are not in compliance with the agreement.
For a prospective franchisee, this means that if they fail to meet their obligations under the Franchise Agreement, Chocolate Fish Coffee can take immediate action to protect its interests. This could have a significant impact on the franchisee's ability to operate the business, as they may be required to pay cash on delivery or may not be able to obtain necessary supplies. It is important for franchisees to understand their obligations under the Franchise Agreement and to take steps to avoid default in order to maintain a good relationship with Chocolate Fish Coffee and ensure the continued success of their business.
This is a fairly standard clause in franchise agreements. It is important for prospective franchisees to be aware of the conditions under which Chocolate Fish Coffee can discontinue supplies and the potential consequences of such actions.