What is the definition of 'Deficiency Gap' for a Christian Brothers Automotive franchise?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
of terminating this Agreement, to allow Franchisee to enter into
Franchisor's Store In Distress Support Program by executing the Store In Distress
Support Program Agreement attached hereto as Exhibit "D".
(b) Net Ordinary Income Above Minimum Threshold. Following the Startup Period,
and in addition to the requirements in subsection (a) above, Franchisee must not
allow its Net Ordinary Income to fall thirty percent (30%) or more below the mean
Net Ordinary Income of all mature Christian Brothers Automotive franchises for
three (3) consecutive years (the "Minimum Threshold"). The mean franchise-wide
Net Ordinary Income will be determined by the closed financial statements of all
Mature Franchisees as of December 31 of each year. For purposes of this Section
Franchise Agreement (Ver 04-14-2025)
Franchisee: ___________
Franchisor: Christian Brothers Automotive Corporation
10.17, a "Mature Franchisee" shall mean a franchisee whose Christian Brothers
Automotive franchise location has been open to the public for a minimum of twelve
(12) months as of December 31 of the year for which the mean Net Ordinary
Income is being calculated. If the foregoing Minimum Performance Requirement
is not maintained at any time during the term of this Agreement following the
Startup Period, Franchisor, in its sole discretion, may terminate this Agreement and
all rights granted hereunder without affording Franchisee an opportunity to cure the
default, in accordance with Section 14.02(c). Franchisor may modify the foregoing
Minimum Threshold from time to time in its sole and absolute discretion. Any such
modification of the Minimum Threshold shall be provided to Franchisee through
the Confidential Operations Manual. In the event of a renewal, the three (3)
consecutive years used to determine whether the Minimum Threshold is satisfied
under this Section 10.17(b) shall include the period preceding the applicable
Renewal Term, such that the period of three (3) consecutive years may span the
date of renewal.
Source: Item 23 — RECEIPTS (FDD pages 76–372)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, a Christian Brothers Automotive franchisee must maintain a certain level of Net Ordinary Income to avoid being in default of their franchise agreement. Specifically, following the Startup Period, a franchisee's Net Ordinary Income must not fall thirty percent (30%) or more below the mean Net Ordinary Income of all mature Christian Brothers Automotive franchises for three (3) consecutive years. This threshold is referred to as the "Minimum Threshold".
The mean franchise-wide Net Ordinary Income is calculated using the closed financial statements of all Mature Franchisees as of December 31 of each year. A "Mature Franchisee" is defined as a franchisee whose Christian Brothers Automotive location has been open to the public for a minimum of twelve (12) months as of December 31 of the year for which the mean Net Ordinary Income is being calculated.
If a franchisee fails to meet this Minimum Threshold, Christian Brothers Automotive, in its sole discretion, may terminate the agreement without providing an opportunity to cure the default. The franchisor also retains the right to modify the Minimum Threshold from time to time, with any such changes communicated through the Confidential Operations Manual. This means that a franchisee's performance is continuously evaluated against the average performance of other established locations, and failure to keep up could lead to termination of the franchise agreement.