Under what conditions can Cinch I.T. terminate the Multi-Unit Development Agreement for cause?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | agreement | Summary |
|---|---|---|
| f. Termination by us with cause | Section 7 | We have discretionary right to terminate the Multi-Unit Development Agreement for cause. Termination of the Multi Unit Development Agreement does not terminate any of the Franchise Agreements that you have signed before termination (subject to local state law). |
| h. "Cause" defined-non curable defaults | Section 32 | Cessation of business for one business day, misuse of trademark or licensed rights, having interest in a competitor, repeated defaults even if cured, abandonment, deliberate understating of sales, bankruptcy, creditors attach or foreclose business property, conviction or "no contest" plea to a felony, false statements on franchise application, unauthorized transfer, failure to maintain independent contractor status with us. |
| f. Termination by franchisor with cause | Section 32 | Failure to cure material breach within 15 days. (subject to local state law). Any default of your Franchise Agreement is a material default under any and all other agreements between us and our affiliates. |
| g. "Cause" defined-curable defaults | Section 32 | Failure to make payments, failure to maintain Franchised Business according to System Standards, failure to submit reports, failure to follow Operations Manual, failure to get permission when needed, default in other terms and covenants not separately identified. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 48–56)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, Cinch I.T. has the discretionary right to terminate the Multi-Unit Development Agreement for cause. The FDD specifies two categories of "cause" for termination: non-curable defaults and curable defaults.
Non-curable defaults, as detailed in Section 32 of the agreement, include specific actions or events that Cinch I.T. deems serious enough to warrant immediate termination. These include cessation of business for one business day, misuse of trademarks or licensed rights, having an interest in a competing business, repeated defaults even if cured, abandonment, deliberate understating of sales, bankruptcy, creditors attaching or foreclosing business property, conviction or a "no contest" plea to a felony, false statements on the franchise application, unauthorized transfer, and failure to maintain independent contractor status with Cinch I.T.
For curable defaults, termination can occur if the franchisee fails to cure a material breach within 15 days, as stated in Section 32. Any default of the Franchise Agreement is considered a material default under all agreements between the franchisee and Cinch I.T. and its affiliates. Curable defaults include failure to make payments, failure to maintain the Franchised Business according to System Standards, failure to submit reports, failure to follow the Operations Manual, failure to get permission when needed, and default in other terms and covenants not separately identified.
It is important to note that termination of the Multi-Unit Development Agreement does not automatically terminate any existing Franchise Agreements signed before the termination, although this is subject to local state law. Prospective franchisees should carefully review Section 7 and Section 32 of the Multi-Unit Development Agreement, as well as relevant state laws, to fully understand the circumstances under which Cinch I.T. can terminate the agreement and the potential consequences.