Can Chocolate Fish Coffee terminate a franchise agreement for reasons other than 'good cause'?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
r permit any audit or inspection by Chocolate Fish Franchising or its agents or contractors, or otherwise fails to comply with Section 10.5 or Section 11.2;
- (x) the Business is operated in a manner which, in Chocolate Fish Franchising's reasonable judgment, constitutes a significant danger to the health or safety of any
- person, and Franchisee fails to cure such danger within 48 hours after becoming aware of the danger (due to notice from Chocolate Fish Franchising or otherwise);
- (xi) Franchisee has received two or more notices of default and Franchisee commits another breach of this Agreement, all in the same 12-month period;
- (xii) Chocolate Fish Franchising (or any affiliate) terminates any other agreement with Franchisee (or any affiliate) due to the breach of such other agreement by Franchisee (or its affiliate) (provided that termination of a Multi-Unit Development Agreement with Franchisee or its affiliate shall not give Chocolate Fish Franchising the right to terminate this Agreement);
- (xiii) Franchisee or any Owner is charged with, pleads guilty or no-contest to, or is convicted of a felony; or
- (xiv) Franchisee or any Owner is accused by any governmental authority or third party of any act, or if Franchisee or any Owner commits any act or series of acts, that in Chocolate Fish Franchising's opinion is reasonably likely to materially and unfavorably affect the Chocolate Fish Coffee brand.
Source: Item 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to the 2024 Chocolate Fish Coffee Franchise Disclosure Document, there are several instances in which Chocolate Fish Coffee can terminate the franchise agreement. These include, but are not limited to, if the franchisee fails to cure a dangerous situation within 48 hours of becoming aware of it, receives two or more notices of default within a 12-month period and commits another breach, or if any agreement between the franchisee (or an affiliate) and Chocolate Fish Coffee (or an affiliate) is terminated due to a breach by the franchisee.
Additionally, Chocolate Fish Coffee can terminate the agreement if the franchisee or any owner is charged with, pleads guilty or no-contest to, or is convicted of a felony. Chocolate Fish Coffee can also terminate the agreement if the franchisee or any owner is accused of any act that, in Chocolate Fish Coffee's opinion, is reasonably likely to materially and unfavorably affect the Chocolate Fish Coffee brand.
It is important to note that in Maryland, the franchise can only be terminated for 'good cause'. 'Good cause' includes any material violation of the franchise agreement. These termination clauses are typical in franchise agreements to protect the brand and maintain standards across all franchise locations. Prospective franchisees should carefully review all termination clauses with legal counsel to fully understand their rights and obligations.