Does Closet Storage Concepts have a duty to exercise its powers under the agreement?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor may receive fees and other payments from suppliers and others in connection with Franchisee's purchases and may use the fees for Franchisor's own purposes.
Franchisor shall provide Franchisee a standard price list for items which it sells to franchisees, including a description of each item and applicable price or lease terms, prepayment discounts (if any) and shipping charges.
Franchisor reserves the right to withhold approval of any supplier for any reason.
5.3 Operations.
5.3.1 Franchisee shall operate the Franchised Business for at least those hours and days specified by Franchisor in the Operations Manual and will at all times operate the Franchised Business diligently so as to maximize the revenues and profits therefrom.
5.3.2 Franchisee is not limited to providing services and products to only customers inside of the Territory.
However, Franchisee may not market, advertise for and/or solicit for orders outside of the Territory, except as provided under this Agreement.
If an installation is to take place within another franchisee's Territory, it is a violation of this Agreement if Franchisee does not notify Franchisor and the affected franchisee before the installation occurs.
In the Franchisor's sole discretion, Franchisee may be required to cooperate with that franchisee, share in the installation, share any financial compensation, or give the job to the other franchisee.
5.3.3 Franchisee shall at all times maintain and employ working capital as Franchisor may reasonably deem necessary to enable Franchisee to properly and fully carry out and perform all of its duties, obligations and responsibilities under this Agreement and to operate the business in a businesslike, proper and efficient manner.
5.3.4 Franchisee shall operate the Franchised Business in conformity with the highest ethical standards and sound business practices and in a manner which shall enhance the Closet & Storage Concepts Proprietary Marks and the Closet & Storage Concepts System.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
The 2025 Closet Storage Concepts Franchise Disclosure Document outlines specific instances where Closet Storage Concepts retains discretionary rights but does not explicitly state an overarching duty to exercise its powers under the franchise agreement. For example, Closet Storage Concepts reserves the right to withhold approval of any supplier for any reason. Additionally, if a franchisee's installation is to take place within another franchisee's territory, Closet Storage Concepts has the sole discretion to require the franchisee to cooperate, share the installation or financial compensation, or give the job to the other franchisee.
The franchise agreement also details the process for a franchisee to open additional locations within their territory. According to the agreement, Closet Storage Concepts provides the franchisee with a 30-day right of first refusal to open an additional location in their territory after receiving notification from Closet Storage Concepts. If the franchisee elects not to open the additional location or fails to do so within three months (unless due to circumstances beyond their control), Closet Storage Concepts has the right, at its sole discretion, to accept offers from other parties to become a franchisee or operate a company-owned location in the territory.
These clauses indicate that while Closet Storage Concepts retains certain rights and powers, the decision to exercise them is often at their discretion rather than a mandated duty. This flexibility allows Closet Storage Concepts to adapt to various situations and market conditions, but it also means that franchisees cannot necessarily rely on Closet Storage Concepts to take specific actions, even if those actions might benefit the franchisee. Prospective franchisees should seek clarification from Closet Storage Concepts regarding the circumstances under which the franchisor would typically exercise its discretionary powers and what factors influence those decisions.