What constitutes a 'default' under the City Wide franchise agreement that could lead to termination?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
ituted against Franchisee and not dismissed within ninety (90) days; or
- 14.1.3 If any of Franchisee's real or personal property will be sold after levy upon it by any sheriff, marshal, or constable; or
- 14.1.4 If Franchisee or any officer, director, stockholder, or general partner of Franchisee is convicted of or admits to the commission of any felony or crime involving moral turpitude or any other crime that CITY WIDE reasonably determines could have an adverse effect on the Franchised Business, the System, or the Marks; or
- 14.1.5 If Franchisee knowingly maintains false books or records or make or have made any materially false statement or report to CITY WIDE in connection with this Agreement or Franchisee's application for this Franchise; or
- 14.1.6 If CITY WIDE, at its sole and absolute right, determines that Franchisee or any person Franchisee designates for mandatory training pursuant to Section 4.1 of this Agreement has not satisfactorily completed the training or been approved by CITY WIDE after a face-to-face interview and evaluation; or
- 14.1.7 If Franchisee commits two or more acts of default under this Agreement within any twelve (12) month period, regardless of whether such defaults are cured or waived; provided, however, that a default under Section 6.5 ("Annual Revenue Per Capita Growth") will not be counted for purposes of applying this subsection; or
- 14.1.8 If Franchisee fails to operate and equip the Franchised Business as provided in Sections 6 and 7 of this Agreement; or
- 14.1.9 If Franchisee is a party to any other franchise agreement with CITY WIDE which agreement CITY WIDE has terminated in accordance with the terms and conditions of such other
franchise agreement (unless such termination is based solely on Franchisee's failure to meet the Annual Revenue Per Capita Growth requirements or similar growth requirements); or
- 14.1.10 If Franchisee fails to operate the Franchised Business during normal business hours for a period of seven (7) days or more without the prior written consent of CITY WIDE or any other circumstance which would lead a reasonable person to believe that Franchisee has permanently left the Franchised Business, and CITY WIDE will declare that Franchisee have abandoned the business for purposes of this Agreement.
- 14.2 Termination After Failure to Cure. Franchisee will be deemed to be in default under this Agreement and CITY WIDE may elect to terminate this Agreement and all rights granted under this Agreement if within thirty (30) days after CITY WIDE sends Franchisee written notification setting out the nature of the default ("Notice to Cure"), or within any such period set forth in this Agreement or permissible by law, Franchisee does not correct the default to CITY WIDE's satisfaction:
- 14.2.1 If Franchisee ceases to operate the Franchised Business in the Designated Territory, or otherwise forfeit the right to do or transact business in the jurisdiction where the Franchised Business is located; provided, however, that if any such loss of possession results from the governmental exercise of the power of eminent domain, or if, through no fault of Franchisee, the premises are damaged or destroyed by a disaster such that they cannot, in CITY WIDE's judgment, reasonably be restored, then, in either such event, no default will be deemed to have occurred if, within thirty (30) days after the damage or taking by eminent domain, Franchisee has applied to CITY WIDE for approval to relocate the Franchised Business for the remainder of the Term, which approval will not unreasonably be withheld, but which may be conditioned upon the payment of a service fee and a minimum royalty percentage to CITY WIDE during the period in which the Franchised Business is not in operation; or
- 14.2.2 If a threat or substantial danger to public health, safety, welfare or sanitation, or any notice of violation of any law, ordinance or regulation results from the construction, maintenance, or operation of the Franchised Business;
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, several actions or inactions can lead to a franchisee being declared in default, potentially resulting in the termination of the franchise agreement. These defaults are outlined in Section 14 of the franchise agreement and can trigger immediate termination without prior notice or an opportunity to cure in certain situations.
Immediate termination events include insolvency, making an assignment for the benefit of creditors, or the filing of a bankruptcy petition against the franchisee that is not released within 60 days. Similarly, the appointment of a receiver or custodian for the franchisee's business or assets, if consented to by the franchisee, also constitutes an immediate default. Knowingly maintaining false books or records, making materially false statements to City Wide, or failing to satisfactorily complete mandatory training can also lead to termination.
City Wide may also elect to terminate the agreement if a franchisee commits two or more acts of default within a 12-month period, regardless of whether the defaults are cured, although defaults related to annual revenue per capita growth are excluded from this calculation. Failing to operate and equip the franchised business as required, being party to another terminated City Wide franchise agreement, or failing to operate the business during normal hours for seven or more days without written consent can also result in termination. A franchisee can also be in default for breaching any term in any agreement with City Wide or its affiliates if the default is uncured.
Furthermore, City Wide may terminate the agreement if the franchisee fails to correct a default within 30 days after receiving written notification (a "Notice to Cure") from City Wide, or within any other period specified in the agreement or allowed by law. Upon default, City Wide has the rights of a secured party under the UCC, including the right to enter the franchisee's premises and repossess products and goods in which City Wide has a security interest. Franchisees should carefully review Section 14 of the franchise agreement to fully understand the circumstances that could lead to a default and subsequent termination of their City Wide franchise.