What constitutes 'good faith' when a Coffee News franchisee is contesting a debt?
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 Coffee News' 2025 Franchise Disclosure Document, a franchisee must actively contest any debts in good faith. Specifically, the franchisee is obligated to promptly pay all taxes, accounts, and indebtedness incurred in the conduct of their Coffee News business when they are due. However, this requirement is waived if the franchisee is actively contesting the debt in good faith.
This clause protects the franchisee from being in breach of the franchise agreement if they have a legitimate dispute over a debt. However, the FDD does not define what actions constitute 'good faith'. It would be prudent for a prospective franchisee to seek clarification from Coffee News regarding the specific criteria used to determine 'good faith' in such situations.
It is important to note that the franchisee must notify Coffee News in writing within five days of the commencement of any action, suit, or proceeding that could materially and adversely affect the franchisee's financial condition. Similarly, the franchisee must notify Coffee News within five days of the issuance of any order, writ, injunction, award, or decree from a court, agency, or governmental body that adversely affects the franchisee's financial condition. These notification requirements ensure that Coffee News is kept informed of any potential financial difficulties faced by the franchisee.