Under the Christian Brothers Automotive lease agreement, what constitutes a default?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
ons of any civil or military authority purporting to act under any Law,
or by acts of God, war or civil disorders, or by the existence or declaration of a
pandemic or epidemic, or by labor union activity.
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, and any default under this Agreement will constitute a default under
the Commercial Sub-Lease Agreement and under any and all other agreements between
Franchisee and Franchisor or between Franchisee and any affiliates of Franchisor.
Franchise Agreement (Ver 04-14-2025)
Franchisee: ___________
Franchisor: Christian Brothers Automotive Corporation
14.04 Notice Required by Law. Notwithstanding anything to the contrary contained in this
Section 14, if applicable law or regulation limits Franchisor's rights of rescission or
termination or requires longer notice periods than those set forth above, this Agreement
shall be deemed amended to conform to the minimum notice periods or restrictions upon
rescission or termination required by such laws and regulations. Franchisor shall not,
however, be precluded from contesting the validity, enforceability or application of such
laws or regulations in any action, arbitration, hearing or dispute relating to this Agreement
or the rescission or termination thereof.
14.05 Step-In Rights. In order to prevent any interruption of the operations which would cause
harm to the Franchised Business and/or the System, Franchisor has the right, but not the
obligation, to step-in and designate an individual of its choosing (an "Interim Manager"),
for so long as Franchisor deems necessary and practical, to temporarily manage the
Franchised Business until such time as the Franchised Business is transitioned to a new
franchisee pursuant to Sections 13.02 or 15.08 or the Franchisor determines Franchisee can
resume operation of the Franchised Business (the "Step-In Rights"). Franchisor may elect
to exercise its Step-In Rights if: (i) Franchisee commits a non-curable default; (ii)
Franchisee commits a default and fails to cure such default within the applicable cure
period; (iii) Franchisor determines in its sole discretion that the Franchisee has materially
failed to operate the Franchised Business in compliance with the standards, procedures and
policies set forth in Franchisor's Confidential Operations Manual or this Agreement, such
that the operational deficiencies require that Franchisor assume the management of the
Franchised Business; (iv) Franchisee abandons or fails to actively operate the Franchised
Business; or (v) the Principal Operator dies or is temporarily or permanently disabled or
Franchise Agreement (Ver 04-14-2025)
incapacitated. If Franchisor exercises its Step-In Rights, then within three (3) business days of Franchisee's receipt of written notice from Franchisor that it is exercising its Step-In Rights under this Section 14.05: (a) Franchisor shall keep in a separate account all monies generated by the operation of the Franchised Business, less the expenses of the Franchised Business incurred, including, without limitation, as a result of Franchisor assuming operation of the Franchised Business, insurance premiums, trade payables, reasonable compensation and expenses for Franchisor's representatives (including an Interim Manager) as well as Franchisor's other expenses incurred in exercising its rights, provided, Franchisee acknowledges and agrees that Franchisor will not assume, and Franchisee remains responsible for, any debt service obligations incurred by Franchisee; (b) Franchisee agrees to hold harmless Franchisor and its representatives for all actions occurring during the course of such temporary management of the Franchised Business and acknowledges that the Interim Manager and such representatives will have no liability to Franchisee, except to the extent directly caused by the gross negligence or willful misconduct of the Franchisor or Interim Manager; (c) Franchisee agrees to pay Franchisor a monthly management fee which shall be equal to $5,000.00 per month; (d) Franchisee agrees to pay Franchisor (in addition to the management fee) all of its reasonable costs and expenses, including, but not limited to, attorneys' fees incurred as a consequence of exercising its Step-In Rights;
Source: Item 23 — RECEIPTS (FDD pages 76–372)
What This Means (2025 FDD)
According to the 2025 Christian Brothers Automotive Franchise Disclosure Document, a default under the Commercial Sub-Lease Agreement, or any other agreement between the franchisor and franchisee, constitutes a default under the Franchise Agreement. This also applies to any lease agreement between the franchisee and any affiliate of Christian Brothers Automotive or any third-party lessor. Conversely, any default under the Franchise Agreement also constitutes a default under the Commercial Sub-Lease Agreement and all other agreements between the franchisee and Christian Brothers Automotive or its affiliates.
Christian Brothers Automotive can terminate the agreement without the opportunity to cure the default if the franchisee declares bankruptcy or becomes insolvent, assigns assets for the benefit of creditors, admits inability to pay debts, or faces an uncontested bankruptcy petition that is not dismissed within 120 days. Immediate termination can also occur if the franchisee fails to operate the business for five consecutive days, fails to meet Minimum Performance Requirements outlined in Section 10.17 of the agreement, or if both parties agree in writing to terminate the agreement.
Additionally, Christian Brothers Automotive can terminate the agreement without the opportunity to cure if the franchisee makes any material misrepresentation relating to the acquisition of the Franchised Business or engages in conduct that reflects unfavorably upon the operation and reputation of the Franchised Business, Christian Brothers Automotive's reputation, the Marks, the System, services and/or products. This also applies if the franchisee knowingly makes a material misrepresentation relating to the operation of the Franchised Business, knowingly maintains false books or records, or knowingly submits any false statements or reports to Christian Brothers Automotive.
Furthermore, a franchisee will be in default if they plead guilty or nolo contendere in a court of competent jurisdiction to a felony or any other crime of moral turpitude, breaches any obligations set forth in Section 10.23 of the Agreement, or if the operation of the Franchised Business is materially impaired by any law, statute, ruling, ordinance, regulation, actions of civil or military authority, acts of God, war, civil disorders, pandemic, epidemic, or labor union activity.