What conditions must Dauntless satisfy to obtain a successor term from City Wide?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
1, in Minneapolis, Minnesota.
ITEM 3 LITIGATION
Dauntless Enterprises, Inc. and Kenneth Ayers v. City Wide Franchise Company, Inc. (United States District Court for the District of Kansas, Case No. 2:23-cv-02273, filed June 16, 2023). Dauntless Enterprises, Inc., a CITY WIDE franchisee ("Dauntless"), and Kenneth Ayers, its owner ("Ayers"), filed this suit against CITY WIDE seeking a preliminary injunction in connection with the expiration of Dauntless' franchise agreement. Plaintiffs alleged that Dauntless satisfied each of the renewal conditions set forth in the franchise agreement with CITY WIDE and was therefore entitled to a 10-year renewal term of the franchise agreement. CITY WIDE disagreed that Dauntless satisfied all renewal conditions (although CITY WIDE had agreed provide a step-up renewal if Dauntless met certain financial and operational milestones). In their Complaint, plaintiffs alleged breach of contract against CITY WIDE and further sought to enjoin CITY WIDE from: (i) refusing to renew Dauntless' franchise agreement and (ii) terminating the franchise agreement upon the expiration of the initial 15-year term on June 19, 2023, pending a final ruling on plaintiffs' claims in arbitration. CITY WIDE opposed plaintiff's motion for preliminary injunction. On or around June 22, 2023, Dauntless and Ayers filed a demand for arbitration alleging breach of contract and breach of the covenant of good faith and fair dealing, seeking to require CITY WIDE to specifically perform the franchise agreement by entering into a new franchise agreement for a 10-year term. The parties settled all claims on July 7, 2023. Under a definitive settlement agreement dated July 28, 2023, the parties extended the initial term of the franchise agreement through December 31, 2026 (the "2026 Calendar Year") and provided Dauntless with the option to obtain a successor term from January 1, 2027, through April 3, 2033, if Dauntless satisfies certain renewal conditions. The renewal conditions vary depending on the amount of Gross Sales that Dauntless will achieve in the 2026 Calendar Year. Pursuant to the settlement agreement, Dauntless also agreed to retain at least four sales executives throughout the term of the franchise agreement, including any successor term. On August 1, 2023, the arbitration and federal court case were both dismissed with prejudice.
Other than the action described above, no litigation is required to be disclosed in this ITEM.
ITEM 4 BANKRUPTCY
No bankruptcies are required to be disclosed in this ITEM.
ITEM 5 INITIAL FEES
Initial Fees
Upon your execution of the Franchise Agreement, you must pay to CITY WIDE the initial franchise fee ("Initial Franchise Fee") of $70,000 for the right to operate one CITY WIDE franchise. The Initial Franchise Fee is imposed uniformly on all franchisees (including franchisees who purchase existing territories). You must also pay an initial training fee ("Initial Training Fee") in the amount of $7,500.
To honor those men and women who have served in the U.S. military, the Veterans Transition Franchise Initiative, known as "VetFran," was developed to help those individuals' transition to civilian life. This initiative is a voluntary effort of International Franchise Association (IFA) member-companies and is designed to encourage franchise ownership by offering financial incentives to honorably discharged veterans. CITY WIDE offers a ten percent (10%) discount of the Initial Franchise Fee for the first Franchised Business to individuals who qualify under VetFran.
In addition to the Initial Franchise Fee and Initial Training Fee, upon your execution of the Franchise Agreement, you must pay to CITY WIDE an initial territory fee ("Initial Territory Fee"), which is based upon your Designated Territory's population (as set forth in Attachment B to the Franchise Agreement), as set forth in the following chart:
| TERRITORY SIZE | INITIAL TERRITORY FEE |
|---|---|
| Less than 1,000,000 population | $15,000 |
| 1,000,001 to 1,499,999 | $30,000 |
| population | |
| 1,500,000 – | $35,000 |
| 1,999,999 | |
| 2,000,000 | $50,000 |
| and above |
All population determinations shall be based upon the latest United States Census information available for the proposed Designated Territory, including any data available at https://www.census.gov. The determination of a Designated Territory's size and the Initial Territory Fee to be paid for such Designated Territory shall be at the sole and absolute right of CITY WIDE. The Initial Territory Fee is deemed to be fully earned and non-refundable under any circumstances.
A technology provisioning fee ("Technology Provisioning Fee") of $12,500 is payable to CITY WIDE prior to the opening of the Franchised Business. The Technology Provisioning Fee is payment for the establishment of the CITY WIDE proprietary operating software systems.
CITY WIDE refers to the Initial Franchise Fee, Initial Training Fee, Initial Territory Fee and the Technology Provisioning Fee collectively as "Initial Fees." In CITY WIDE's most recent fiscal year, the range of Initial Fees CITY WIDE collected was from $105,000 to $140,000, due to the size of the franchisees' respective territories.
Non-Refundability of Initial Fees
Upon your execution of the Franchise Agreement, the Initial Franchise Fee and Initial Territory Fee are deemed to be fully earned and non-refundable under any circumstances, except as provided below:
- a. If CITY WIDE, at its sole and absolute right, after evaluating your personal abilities, aptitudes and financial qualifications to be a franchisee, elects within 15 days following the submission of all data to terminate your Franchise Agreement, you will receive a refund of your Initial Fees, less an evaluation fee which will not exceed $2,500.
- b. If you are unable to provide adequate proof of financing or have sufficient assets and in an acceptable form, at CITY WIDE's sole and absolute right, within 30 days of the execution of the Franchise Agreement, then upon written notice by either party, CITY WIDE or you may terminate the Franchise Agreement and CITY WIDE will refund the Initial Fees paid to CITY WIDE by you, less the sum of $2,500 as liquidated damages. (See Section 3.4 of the Franchise Agreement)
- c.
Source: Item 3 — LITIGATION (FDD page 14)
What This Means (2025 FDD)
According to the 2025 City Wide Franchise Disclosure Document, Dauntless Enterprises, Inc., a City Wide franchisee, was involved in a legal dispute with City Wide that was later settled. As part of the settlement agreement dated July 28, 2023, Dauntless was given the option to obtain a successor term from January 1, 2027, through April 3, 2033, if Dauntless satisfies certain renewal conditions. These renewal conditions are contingent upon the amount of Gross Sales Dauntless achieves in the 2026 calendar year. The settlement agreement also stipulates that Dauntless must retain at least four sales executives throughout the term of the franchise agreement, including any successor term.
In general, any City Wide franchisee seeking a successor term must meet several standard conditions. The franchise agreement must be in full force and effect on the last day of the term and not have expired. The franchisee must provide City Wide with written notice of their desire to enter into a Successor Term not less than one year before the expiration of the current term. City Wide then has 60 days to respond to the request. Additionally, City Wide will inspect the franchised business and equipment at least 90 days before the term expires, notifying the franchisee of any required maintenance, refurbishing, renovating, remodeling, or equipment upgrades, which the franchisee must complete at their own expense to City Wide's satisfaction no later than 30 days after the term expires.
To be eligible for a successor term, a City Wide franchisee must not be in default of any agreement with City Wide or its subsidiaries and must have substantially complied with all terms and conditions of the agreements during the term, including the Annual Revenue Per Capita Growth requirement. The franchisee's operation of the franchised business must be in full compliance with the standards and specifications outlined in the franchise agreement and the City Wide Operating Manual. All other franchise agreements, if any, must also be in full compliance. The franchisee must have satisfied all monetary obligations to City Wide and its affiliates in a timely manner throughout the term.
Furthermore, the franchisee must execute the current form of franchise agreement, including the Successor Addendum, which may have different terms, such as higher Royalty and Marketing Fees. A Successor Fee equal to 50% of the then-current Initial Franchise Fee must be paid when the Successor Franchise Agreement is executed. Franchisees must also comply with City Wide's current criteria for operating a franchised business, including qualification and training requirements. Finally, the franchisee must execute a general release of claims against City Wide and provide evidence that they have the right to remain in possession of the office location for the term or an acceptable alternative location. If a franchisee does not enter into a Successor Franchise Agreement, they must sell their rights to the Designated Territory to City Wide or a City Wide-approved third party before the term expires, with City Wide retaining the right of first refusal.