Under what conditions can Chop5 Salad Kitchen terminate the Area Development Agreement with cause?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
nate if you default. | | us with cause | | | | | ADA: 9.2 | We can terminate if you default. |
| PROVISION | SECTIONS IN AGREEMENT | SUMMARY | |
|---|---|---|---|
| You have 10 days to cure any monetary default or failure to maintain required insurance. | |||
| g. "Cause" defined | FA: 20.2 | You have 7 days to cure a health or safety hazard (we may require you to immediately close the Restaurant until cured). | |
| - curable defaults | ADA: 9.2 | You have 30 days to cure any other default, other than defaults described below under "non-curable defaults". You have 30 days to cure any default, other than defaults described below under "non-curable defaults". | |
| h. "Cause" defined - non-curable defaults | FA: 20.2 ADA: 9.2 | The following defaults cannot be cured: insolvency, bankruptcy or seizure of assets; failure to successfully complete training; failure to find approved site or open in timely manner; abandonment; failure to maintain required license or permit; conviction of certain crimes or subject of certain administrative actions; failure to comply with material law; commission of act that may adversely affect reputation of System or Marks; health or safety hazards; material misrepresentations; 2nd underreporting of amounts due by at least 3%; unauthorized Transfers; unauthorized use of our intellectual property; violation of brand protection covenant; breach of Franchise Owner Agreement by owner or spouse; breach of legal compliance representations; termination of lease due to your default; 3 or more default notices in any 12-month period; or termination of any other agreement between you (or your affiliate) and us (or our affiliate) due to your default. However, termination of an ADA due to breach of the development schedule is not grounds for termination of any Franchise Agreement that is otherwise in good standing. If we terminate a franchise agreement due to your default, we may terminate the ADA without opportunity to cure. | |
| i. Your obligations on termination/ non-renewal | FA: 21.1 ADA: Not Applicable | Obligations include: remove trade dress and alter premises to eliminate any resemblance to a Restaurant; cease use of intellectual property; return Manual and branded materials; assign telephone numbers, listings and domain names; cancel fictitious names; comply with data retention policies; and pay amounts due (also see "r", below). The ADA does not impose any post-term obligations on you. | |
| j. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 41–45)
What This Means (2024 FDD)
According to Chop5 Salad Kitchen's 2024 Franchise Disclosure Document, the company can terminate the Area Development Agreement (ADA) if the franchisee defaults. The franchisee has an opportunity to cure certain defaults. For monetary defaults or failure to maintain required insurance, the franchisee has 10 days to cure the issue. For health or safety hazards, the franchisee has 7 days to cure the issue, and Chop5 Salad Kitchen may require the franchisee to immediately close the restaurant until the issue is resolved. For any other default, the franchisee has 30 days to cure, except for defaults considered non-curable.
Non-curable defaults include events such as insolvency, bankruptcy, or seizure of assets; failure to successfully complete training; failure to find an approved site or open in a timely manner; abandonment; failure to maintain required licenses or permits; conviction of certain crimes or being subject to certain administrative actions; failure to comply with material law; committing an act that may adversely affect the reputation of the Chop5 Salad Kitchen system or marks; health or safety hazards; material misrepresentations; a second instance of underreporting amounts due by at least 3%; unauthorized transfers; unauthorized use of Chop5 Salad Kitchen's intellectual property; violation of brand protection covenants; breach of the Franchise Owner Agreement by an owner or spouse; breach of legal compliance representations; termination of a lease due to the franchisee's default; receiving three or more default notices in any 12-month period; or termination of any other agreement between the franchisee (or their affiliate) and Chop5 Salad Kitchen (or its affiliate) due to the franchisee's default.
However, Chop5 Salad Kitchen specifies that the termination of an ADA due to a breach of the development schedule is not grounds for terminating any Franchise Agreement that is otherwise in good standing. Additionally, if Chop5 Salad Kitchen terminates a franchise agreement due to the franchisee's default, they may terminate the ADA without providing an opportunity to cure the default.