Under what conditions can Chocolate Fish Coffee terminate a franchise agreement for cause?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in franchise | Summary |
|---|---|---|
| or other agreement | ||
| f. Termination by | We may terminate your agreement for cause, | |
| franchisor with cause | subject to any applicable notice and cure opportunity. If you sign a Multi-Unit Development Agreement, termination of your MUDA does not give us the right to terminate your franchise agreement. However, if your franchise agreement is terminated, we have the right to terminate your MUDA. | |
| g. “Cause” defined-- | Non-payment by you (10 days to cure); violate | |
| curable defaults | franchise agreement other than non-curable default (30 days to cure). | |
| h. “Cause” defined--non- | FA: Misrepresentation when applying to be a | |
| curable defaults | franchisee; knowingly submitting false information; bankruptcy; lose possession of your location; violation of law; violation of confidentiality; violation of non-compete; violation of transfer restrictions; slander or libel of us; refusal to cooperate with our business inspection; cease operations for more than 5 consecutive days; three defaults in 12 months; cross-termination; conviction of, or plea to a felony, or commission or accusation of an act that is reasonably likely to materially and unfavorably affect our brand; any other breach of franchise agreement which by its nature cannot be cured. MUDA: failure to meet development schedule; violation of franchise agreement or other agreement which gives us the right to terminate it. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 33–36)
What This Means (2024 FDD)
According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, the company can terminate a franchise agreement for cause, subject to any applicable notice and cure opportunity. If a franchisee also signs a Multi-Unit Development Agreement (MUDA), the termination of the MUDA does not automatically allow Chocolate Fish Coffee to terminate the franchise agreement. However, if the franchise agreement is terminated, Chocolate Fish Coffee has the right to terminate the MUDA.
There are two categories of defaults that can lead to termination: curable and non-curable. Curable defaults include non-payment, which allows for a 10-day cure period, and violating any other term of the franchise agreement, which allows for a 30-day cure period.
Non-curable defaults, which allow for immediate termination, include misrepresentation when applying to be a franchisee, knowingly submitting false information, bankruptcy, losing possession of the location, violating a law, violating confidentiality or non-compete agreements, violating transfer restrictions, slandering or libeling Chocolate Fish Coffee, refusing to cooperate with a business inspection, ceasing operations for more than 5 consecutive days, having three defaults within 12 months, cross-termination, conviction of or pleading to a felony, or committing an act that could negatively affect the Chocolate Fish Coffee brand. Any other breach of the franchise agreement that cannot be cured also constitutes a non-curable default. For franchisees with a MUDA, failure to meet the development schedule or violating the franchise agreement or any other agreement that gives Chocolate Fish Coffee the right to terminate it also constitutes cause for termination.