What happens if a Closet Storage Concepts franchisee is in default under the agreement?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
- 2.4.4 All amounts to be paid by Franchisee to Franchisor and/or its affiliates are currently paid, and no default under this Agreement exists uncured five (5) days after the Franchisee has received written notice of any overdue amounts.
Even if no such default exists, Franchisor may revoke said option and refuse to allow said renewal if, during the initial term of this Agreement, Franchisee has been in material default of this Agreement.
Franchisor and Franchisee agree that, for the purposes of this Section, such material default includes, but is not limited to, failure to make one hundred percent (100%) of all payments and submit reports within fifteen (15) days of the date they are actually due.
It is further agreed that such default also includes Franchisee's consistently demonstrated unwillingness to take remedial actions as recommended by Franchisor to improve Franchisee's sales and marketing methods, in accordance with Franchisee's obligations under this Agreement
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, a franchisee's default status can impact their ability to renew their franchise agreement. Specifically, if any amounts owed to Closet Storage Concepts or its affiliates remain unpaid, and the default is not resolved within five days of receiving written notice, the franchisee may not be able to renew their agreement. This condition underscores the importance of maintaining timely payments to the franchisor.
Even if a franchisee is current on all payments at the time of renewal, Closet Storage Concepts may still deny the renewal if the franchisee was in material default of the agreement during the initial term. The FDD specifies that a material default includes failing to make 100% of all payments or submit required reports within 15 days of their due date. Additionally, a material default includes a franchisee's consistent unwillingness to implement recommended remedial actions from Closet Storage Concepts to improve sales and marketing methods, as required by the franchise agreement.
These stipulations regarding default and renewal are fairly standard in franchising. Franchisees should be aware that maintaining good standing with the franchisor, both financially and in adhering to operational standards, is crucial not only for the day-to-day operation of the business but also for securing the option to continue the franchise in the future. Prospective Closet Storage Concepts franchisees should carefully review the franchise agreement to fully understand what constitutes a default and what steps are required to cure any such default.