Can Chocolate Fish Coffee request third-party vendors to not sell to a franchisee in default?
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.
Such rights of Chocolate Fish Franchising are in addition to any other right or remedy available to Chocolate Fish Franchising.
Source: Item 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, if a franchisee is in default or breach of the franchise agreement, Chocolate Fish Coffee has the right to request third-party vendors to stop selling or providing products or services to that franchisee. This is in addition to Chocolate Fish Coffee's right to require the franchisee to pay cash on delivery for products or services supplied by Chocolate Fish Coffee, or to stop selling or providing any products and services to the franchisee themselves.
This provision protects Chocolate Fish Coffee by allowing them to limit their exposure to franchisees who are not meeting their obligations. It also ensures that the brand's reputation is not negatively impacted by a struggling or non-compliant franchisee. By cutting off supplies, Chocolate Fish Coffee can encourage the franchisee to remedy the default or, if necessary, expedite the termination process.
It is important to note that Chocolate Fish Coffee's actions in discontinuing supplies or requesting third-party vendors to do so will not be considered a breach or constructive termination of the agreement. The franchisee remains responsible for all obligations under the agreement, even if supplies are cut off. This clause gives Chocolate Fish Coffee significant leverage in managing franchisees who are not adhering to the terms of their agreements.
For a prospective franchisee, this means understanding the importance of adhering to the franchise agreement and maintaining good standing with Chocolate Fish Coffee. Failure to do so could result in a disruption of supplies, impacting the ability to operate the business. Franchisees should ensure they have sufficient capital and a solid business plan to avoid default and maintain a healthy relationship with Chocolate Fish Coffee and its approved vendors.