Does Chop5 Salad Kitchen's acceptance of noncompliance fees waive their right to terminate the agreement?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
ur standards or operating procedures (including failure to submit required reports in a timely manner) and you fail to correct the non-compliance within the period of time we prescribe, then, in addition to any other remedies available to us under this Agreement, we may impose a noncompliance fee of up to $500 per occurrence. We may impose an additional $500 fee every 48 hours the same non-compliance issue remains uncured after we impose the initial fee. Any noncompliance fees we collect are paid in consideration of us refraining from exercising our contractual right to terminate this Agreement. If we take steps to cure any default committed by you after the expiration of any applicable cure period, including, without limitation, obtaining required insurance coverage on your behalf or paying amounts you owe to approved or designated suppliers, then you must reimburse us for all costs and expenses we incur, either directly or indirectly, in connection with our efforts
Source: Item 23 — RECEIPT (FDD pages 50–178)
What This Means (2024 FDD)
According to the 2024 Chop5 Salad Kitchen Franchise Disclosure Document, the acceptance of noncompliance fees does not constitute a waiver of the right to terminate the franchise agreement. Chop5 Salad Kitchen may impose an additional $500 fee every 48 hours if a non-compliance issue remains unresolved after the initial fee. These fees are collected in consideration for refraining from immediate termination.
Even if Chop5 Salad Kitchen takes steps to correct a franchisee's default, such as obtaining insurance or paying suppliers, the franchisee must reimburse all associated costs. The FDD states that collecting noncompliance fees and default expense reimbursements does not prevent Chop5 Salad Kitchen from terminating the agreement if the default continues, as per Section 20 of the agreement.
This means that a Chop5 Salad Kitchen franchisee cannot assume that paying noncompliance fees will prevent termination if they fail to correct the underlying issue. The franchisor retains the right to terminate the agreement despite accepting these fees, emphasizing the importance of addressing and resolving any non-compliance issues promptly to avoid potential termination.