What constitutes a material breach of the Cost Cutters Family Hair Salon Development Agreement?
Cost_Cutters_Family_Hair_Salon Franchise · 2024 FDDAnswer from 2024 FDD Document
he FRANCHISEE'S Cost Cutters Businesses actually open and continuously operating for business in the Franchised Area as of the end of a given period will be counted toward the number of Cost Cutters Businesses required to be open and continuously operating for business. FRANCHISEE'S first Cost Cutters Business under this Development Agreement must be open and operating within eighteen (18) months after the Cost Cutters Business under the Franchise Agreement executed contemporaneously with this Agreement is required to be open. FRANCHISEE'S second Cost Cutters Business under this Development Agreement must be open and operating within eighteen (18) months after the date the first required Cost Cutters Business under this Development Agreement is required to be open.
3.5 REASONABLENESS OF DEVELOPMENT SCHEDULE. The FRANCHISEE represents that it has conducted its own independent investigation and analysis of the prospects for the establishment
of Cost Cutters Businesses within the Franchised Area, approves of the foregoing development schedule as being reasonable and viable, and recognizes that failure to achieve the results described in the foregoing development schedule will constitute a material breach of this Agreement.
- 3.6 FAILURE TO COMPLY WITH DEVELOPMENT SCHEDULE. The FRANCHISEE'S failure to comply with the above development schedule will constitute a material breach of this Agreement by the FRANCHISEE and, in that event, COST CUTTERS will have the right to terminate this Agreement as provided herein. Termination of this Agreement as a result of the FRANCHISEE'S failure to meet the development schedule set forth above will not affect the individual Franchise Agreements signed by the FRANCHISEE for the Cost Cutters Businesses opened and operated in the Franchised Area pursuant to this Agreement prior to termination; however, upon termination of this Agreement, all rights to open and operate additional Cost Cutters Businesses in the Franchised Area and all other rights granted to the FRANCHISEE under this Agreement will immediately terminate, without affecting those obligations of the FRANCHISEE that continue beyond the termination of this Agreement.
- 3.7 TERMINATION FOR FAILURE TO COMPLY WITH DEVELOPMENT SCHEDULE. If this Agreement is terminated by COST CUTTERS because of the FRANCHISEE'S failure to meet the development schedule set forth above, the rights and duties of COST CUTTERS and the FRANCHISEE will be as follows: (A) the FRANCHISEE will have no further rights to open and operate additional Cost Cutters Businesses within the Franchised Area; and (B) the FRANCHISEE will continue to pay all required fees and to operate its Cost Cutters Businesses opened and operated in the Franchised Area pursuant to the terms of the applicable Franchise Agreements signed by the FRANCHISEE prior to the date of the termination of this Agreement.
- 3.8 COST CUTTERS' RIGHT TO SUSPEND DEVELOPMENT. COST CUTTERS has no obligation to grant FRANCHISEE any additional franchises under this or any other Development Agreement or otherwise if Developer: a) has any accounts receivable with COST CUTTERS that are over 60 days past due; b) has failed to report Gross Revenues for over four consecutive (4) weeks; c) has received three (3) or more default notices or warning of default notices within the most recent twelve (12) month period; d) has not built an existing Cost Cutters salon to the specifications of COST CUTTERS;
Source: Item 23 — RECEIPT (FDD pages 76–439)
What This Means (2024 FDD)
According to Cost Cutters Family Hair Salon's 2024 Franchise Disclosure Document, several actions can constitute a material breach of the Development Agreement. A significant breach includes failing to comply with the agreed-upon development schedule for opening new Cost Cutters Family Hair Salon locations within the franchised area. If a franchisee fails to meet the milestones outlined in the development schedule, Cost Cutters Family Hair Salon has the right to terminate the Development Agreement. However, termination of the Development Agreement does not impact the individual Franchise Agreements for salons already opened and operated by the franchisee.
Additionally, Cost Cutters Family Hair Salon has the right to suspend the franchisee's development rights under certain conditions. These conditions include having accounts receivable that are over 60 days past due, failing to report gross revenues for more than four consecutive weeks, receiving three or more default notices within a 12-month period, failing to build a salon to Cost Cutters Family Hair Salon's specifications, or not using the brand's marketing materials. Failure to promptly correct any of these issues also constitutes a material breach of the Development Agreement.
Other actions that constitute a material breach include, but are not limited to, a franchisee's failure to finance or purchase and pay for the leasehold improvements, furniture, fixtures, supplies, and equipment required for its Cost Cutters Family Hair Salon prior to opening, or breaching any material term of any sublease of Cost Cutters Family Hair Salon, its parent, subsidiaries or affiliates. Also, if the franchisee's lease for the Franchised Location is terminated or canceled or FRANCHISEE is evicted or loses its right to possession of the Franchised Location for nonpayment of rent or any other reason; (J) the FRANCHISEE or any of its partners, directors, officers or majority stockholders is convicted of, or pleads guilty or no contest to, a charge of violating any law relating to the FRANCHISEE'S Cost Cutters Business or any felony; (K) the FRANCHISEE voluntarily or otherwise abandons, as defined herein, the Cost Cutters Business; or (L) diverts, at any time, any business, or any of the products from the Franchise, including the sale of any hair care product to a non end user consumer from the Franchised location or the sale of hair care products through other distribution channels (including the Internet).