What is the fee that Cinch I.T. may charge for each violation of the franchise agreement?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
required to purchase certain services, equipment and operating supplies, as are more particularly set forth in the Operations Manual, from suppliers whose services, products and materials are approved, and not thereafter disapproved, by Us. If You desire to purchase any services or products from suppliers that We have not previously approved, You or the supplier must submit a written request for such approval to Us. As a condition of Our approval, which shall not be unreasonably withheld, We may require that Our representatives be allowed to inspect the supplier's facilities and/or that a sample of its product be made available to Us or Our designee for testing. In such event You or the supplier may be charged a fee of Five Hundred Dollars ($500.00) or the actual cost of such inspection and/or testing, whichever is greater. Within thirty (30) days of delivery of the test results, if testing is conducted, or the written request if testing is not conducted, We will issue a decision in writing. Such decision may be a determination that additional time is needed to complete the review. Any denial will state the reasons.
Source: Item 23 — RECEIPTS (FDD pages 60–269)
What This Means (2024 FDD)
Based on the 2024 Cinch I.T. Franchise Disclosure Document, there is no mention of a specific fee for violations of the franchise agreement. However, the document does state that if a franchisee desires to purchase services or products from suppliers that Cinch I.T. has not previously approved, the franchisee or the supplier may be charged a fee of $500 or the actual cost of inspection and/or testing, whichever is greater. Also, if an extension of a Development Period is granted by Cinch I.T., it may be conditioned upon payment of an extension fee of $5,000 per extension. Furthermore, if a franchisee transfers the franchise, they shall pay a transfer fee of $5,000 for each unopened Cinch I.T. Franchised Business to be transferred, and $10,000 for each Cinch I.T. Franchised Business which is open and operating at the time of transfer.
While the FDD does not explicitly state a fee for violations, it outlines various fees associated with specific actions or requests, such as using unapproved suppliers, extending development periods, and transferring the franchise. These fees are intended to cover Cinch I.T.'s costs and ensure compliance with the franchise agreement.
Prospective franchisees should carefully review the franchise agreement and discuss with Cinch I.T. the potential consequences and associated costs of any actions that could be considered a violation of the agreement. Understanding these potential costs is crucial for making an informed decision about investing in a Cinch I.T. franchise.
It is important to note that the FDD also mentions that Cinch I.T. has the right to seek damages for violations of post-termination obligations, which could include a lump sum termination fee. This fee is calculated based on the net present value of the Royalties and Marketing Fund Fees that would have become due following termination of the agreement.