On what factor do the renewal conditions for Dauntless' franchise with City Wide depend?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 3 — LITIGATION (FDD page 14)
What This Means (2025 FDD)
According to the 2025 City Wide Franchise Disclosure Document, the renewal conditions for Dauntless Enterprises, Inc.'s franchise agreement with City Wide depend on the amount of Gross Sales that Dauntless achieves in the 2026 Calendar Year.
Specifically, Dauntless and City Wide settled claims on July 7, 2023, and under a settlement agreement dated July 28, 2023, they extended the initial term of the franchise agreement through December 31, 2026. The agreement provided Dauntless with 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 based on Dauntless' Gross Sales in the 2026 calendar year.
This means that Dauntless' ability to renew its franchise agreement for an additional term is directly tied to its financial performance, specifically its gross sales, during the 2026 calendar year. This type of performance-based renewal condition is not uncommon in franchising, as it incentivizes franchisees to maintain and grow their business, which benefits both the franchisee and the franchisor.