When can Cost Cutters Family Hair Salon enforce the provisions of the lease assignment?
Cost_Cutters_Family_Hair_Salon Franchise · 2024 FDDAnswer from 2024 FDD Document
- 22.3 PERFECTED ASSIGNMENT; NOTICE. This assignment will constitute a perfected, absolute and present assignment of the Lease; however, COST CUTTERS will have no right under this assignment to enforce the provisions of the Lease until an Event of Default has occurred.
After an Event of Default has occurred, COST CUTTERS will have the right, but not the obligation, to enforce the provisions of this assignment and to take possession of the Franchised Location by giving the FRANCHISEE and the Landlord written notice that it has affirmatively exercised its rights under this assignment.
The written notice will state: (A) that COST CUTTERS is taking and assuming the Lease from the FRANCHISEE; (B) the date that COST CUTTERS will take physical possession of the Franchised Location; and (C) that COST CUTTERS agrees to be bound by the terms and conditions of the Lease being assumed going forward.
COST CUTTERS will execute an assignment form at the time it gives written notice to the FRANCHISEE and the Landlord of its assumption of the Lease.
Source: Item 23 — RECEIPT (FDD pages 76–439)
What This Means (2024 FDD)
According to the 2024 Cost Cutters Family Hair Salon Franchise Disclosure Document, Cost Cutters Family Hair Salon can enforce the provisions of the lease assignment after an Event of Default has occurred. An Event of Default includes situations such as the agreement being terminated by either party, the franchisee wrongfully terminating the agreement, the franchisee ceasing business at the franchised location, or the agreement expiring without the franchisee reacquiring the franchise.
After an Event of Default, Cost Cutters Family Hair Salon has the right, but not the obligation, to enforce the assignment and take possession of the location. To do so, Cost Cutters Family Hair Salon must provide written notice to both the franchisee and the landlord. This notice must state that Cost Cutters Family Hair Salon is assuming the lease, specify the date they will take possession, and confirm their agreement to be bound by the lease terms going forward.
Cost Cutters Family Hair Salon will execute an assignment form when providing this written notice. This ensures a formal transfer of the lease. The original assignment of the lease from the franchisee to Cost Cutters Family Hair Salon acts as security for the franchisee's performance under the franchise agreement, but Cost Cutters Family Hair Salon cannot act on this assignment until an Event of Default occurs.