What constitutes 'actively' contesting a debt in good faith for a Coffee News franchisee?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
- 8.2 Payment of Debts: Adverse Action. Franchisee shall pay promptly when due all taxes, accounts, and indebtedness of any kind incurred by Franchisee in the conduct of its business unless being contested actively in good faith. Franchisee shall pay any tax assessed by any State or other taxing authority in Franchisee's designated region on fee payments to or other revenue received by Franchisor from Franchisee. Franchisee agrees to notify Franchisor in writing within five days of the commencement of any action, suit, or proceeding which, if decided adversely to Franchisee, would materially and adversely affect Franchisee's financial condition and to notify Franchisor within five days of the issuance of any order, writ, injunction, award, or decree of any court, agency or other governmental instrumentality which adversely affects Franchisee's financial condition.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, a franchisee must pay all taxes, accounts, and indebtedness promptly when due, unless being contested actively in good faith. The FDD does not define what 'actively in good faith' means. However, the franchisee is obligated to notify Coffee News in writing within five days of the commencement of any action, suit, or proceeding which, if decided adversely to Franchisee, would materially and adversely affect Franchisee's financial condition. The franchisee must also notify Coffee News within five days of the issuance of any order, writ, injunction, award, or decree of any court, agency or other governmental instrumentality which adversely affects Franchisee's financial condition.
This notification requirement suggests that 'actively contesting' a debt likely involves formal legal or administrative actions. By requiring prompt notification, Coffee News aims to stay informed about potential financial risks to its franchisees and the network as a whole.
Prospective franchisees should seek clarification from Coffee News regarding the specific actions and documentation required to demonstrate that a debt is being 'actively contested in good faith.' Understanding this standard is crucial, as failure to meet it could lead to breaches of the franchise agreement and potential financial repercussions.