What constitutes a material breach of the Christian Brothers Automotive Franchise Agreement?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee's failure to maintain the equipment as required by Franchisor will constitute a material breach of this Agreement.
(v) Franchisee is in breach of any of its obligations set forth in Section 10.23 of this Agreement.
Notwithstanding anything to the contrary contained herein, Franchisee understands and agrees that the occurrence of any of the following events, circumstances, or courses of conduct constitutes a material default under this Agreement, and Franchisor will have the right, but not the obligation, to immediately terminate this Agreement without giving any notice or opportunity to cure to the Franchisee, except as specifically provided in the respective subsection:
(a) Franchisee or the Franchised Business is declared bankrupt or becomes insolvent; or all or a substantial part of the assets thereof are assigned to or for the benefit of any creditor; or Franchisee admits its inability to pay its debts as they become due; or a petition in bankruptcy is filed against Franchisee which is not immediately contested or which is not dismissed within 120 days from its filing.
(b) Franchisee fails to operate the business for five (5) consecutive days during which the Franchisee is required to operate the business under the terms of this Agreement.
(c) Franchisee fails to meet any Minimum Performance Requirement set forth in Section 10.17 of this Agreement.
(e) Franchisee makes any material misrepresentation relating to the acquisition of the Franchised Business or engages in conduct which, in the exercise of Franchisor's sole and exclusive business judgment, reflects materially and unfavorably upon the operation and reputation of the Franchised Business, Franchisor's reputation, the Marks, the System, services and/or products.
(p) The Franchisee fails to comply with the covenants in Sections 16.01, 16.02 and/or 16.05 of this Agreement.
14.03 Cross Default. Any default by Franchisee under the Commercial Sub-Lease Agreement or any other agreement between Franchisor and Franchisee or any lease agreement between Franchisee and any affiliate of Franchisor or any third party lessor will constitute a default under this Agreement
Source: Item 23 — RECEIPTS (FDD pages 76–372)
What This Means (2025 FDD)
According to the 2025 Christian Brothers Automotive Franchise Disclosure Document, several actions or failures can constitute a material breach of the Franchise Agreement. These breaches can lead to termination of the agreement, potentially without an opportunity to cure the breach.
Specifically, a material breach includes failing to maintain equipment as required by Christian Brothers Automotive. For corporate or entity franchisees, failure to furnish required corporate records or limiting business activities can also be considered a material breach. Other actions that constitute a material breach include bankruptcy or insolvency, failing to operate the business for five consecutive days, failing to meet minimum performance requirements, making material misrepresentations, misusing the brand's marks, or failing to comply with non-compete covenants.
Additionally, defaults under related agreements, such as the Commercial Sub-Lease Agreement, can trigger a default under the Franchise Agreement. Franchisees should be aware of all obligations and restrictions outlined in the agreement to avoid actions that could be deemed a material breach. Franchisees should also ensure compliance with Section 10.23 of the agreement, as a breach of any obligations within this section also constitutes a material breach.
It is important for prospective franchisees to carefully review Section 14 and other relevant sections of the Franchise Agreement to fully understand what constitutes a material breach and the potential consequences. Understanding these terms is crucial for maintaining a successful and compliant franchise operation with Christian Brothers Automotive.