What constitutes an adverse effect on a Coffee News franchisee's financial condition that requires notification?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
The Debtor acknowledges and hereby agrees to grant Holder, with any and all the licensed rights to the territory that was granted to Debtor in the foregoing Coffee News Franchise Agreement, to secure the payment set forth in this Promissory Note and to secure the performance of all covenants and agreements contained herein. In the event of a failure to pay interest, principal or any other amount due on this Promissory Note in accordance with its terms, or of a breach of any other covenant, condition or agreement contained herein, remaining uncured for a period in excess of five (5) days (except that no grace period shall be permitted for a default under this Note or the foregoing Coffee News Franchise Agreement), or any breach in the covenants, conditions or agreements in any instrument given in connection with the Promissory Note and debt secured hereby, or if a proceeding in bankruptcy, receivership or insolvency shall be instituted by or against the undersigned, or if the foregoing Coffee News Franchise Agreement for which the parties have entered into this Promissory Note is terminated for any reason, then the entire debt secured hereby, together with all charges to which Holder would be entitled under the Promissory Note or by law if the Promissory Note were prepaid in full, shall be due and payable, Holder shall have the
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, a franchisee's failure to pay interest, principal, or any other amount due on a Promissory Note within five days of the due date constitutes an event requiring notification. This also applies to any breach of covenants, conditions, or agreements related to the Promissory Note or debt. Additionally, if bankruptcy, receivership, or insolvency proceedings are initiated by or against the franchisee, or if the Coffee News Franchise Agreement is terminated for any reason, these events also trigger notification requirements.
In practical terms, this means that a Coffee News franchisee must promptly inform the Holder (likely the franchisor or a lending institution) of any financial difficulties that could impair their ability to meet their financial obligations. The five-day grace period for payment defaults is relatively short, emphasizing the importance of maintaining a strong financial position and proactively addressing any potential payment issues.
The franchisor retains the right to realize the security granted in the Coffee News Franchise Agreement, including selling the franchise, if any of these adverse financial events occur. This underscores the importance of franchisees carefully managing their finances and adhering to the terms of their agreements to avoid potential loss of their franchise. Franchisees should be aware of these conditions and maintain open communication with the franchisor regarding any financial challenges they may face.
It is common practice in franchising for franchisors to require notification of financial distress events, as these can impact the franchisee's ability to operate the business and uphold brand standards. The specific notification requirements and grace periods can vary among franchise systems, so prospective franchisees should carefully review these provisions in the Franchise Agreement and related documents.