Does the Cost Cutters Family Hair Salon FDD contain a sample Sublease agreement?
Cost_Cutters_Family_Hair_Salon Franchise · 2024 FDDAnswer from 2024 FDD Document
e by you will be an insignificant amount of the total purchases required to establish your Cost Cutters Business.
You must sublease from us any Cost Cutters located in a Walmart. The form of that sublease is included in Exhibit G to this disclosure document (the "Walmart Sublease"), that is subject to our Master Lease with Walmart that is included in Exhibit H to this disclosure Document (the "Walmart Master Lease"), including in many instances, a separate schedule to the Walmart Master Lease. Pursuant to our Walmart Master Lease, Walmart may not renew our lease, and thus we cannot renew your Walmart Sublease, if your sales fall below $150,000 per year or any other sales threshold designated by Walmart. Additionally, Walmart can compel us, and thus you, to remodel your Cost Cutters salon if Walmart deems it necessary for various reasons, including that Walmart remodeled the Walmart store and as a condition of renewal of your Walmart Sublease. If we approve
Source: Item 22 — CONTRACTS (FDD page 76)
What This Means (2024 FDD)
According to the 2024 Cost Cutters Family Hair Salon Franchise Disclosure Document, the document includes a specific sublease agreement as an exhibit. For Cost Cutters Family Hair Salon locations within a Walmart, franchisees must sublease the premises from Cost Cutters Family Hair Salon. The form of this sublease is included as Exhibit G in the FDD, referred to as the "Walmart Sublease." This sublease is subject to Cost Cutters Family Hair Salon's master lease agreement with Walmart, which is included as Exhibit H, called the "Walmart Master Lease."
This arrangement means that a franchisee's ability to operate in a Walmart location is contingent upon the terms of the master lease between Cost Cutters Family Hair Salon and Walmart. A significant risk is that Walmart may not renew the master lease if the salon's sales fall below $150,000 per year or any other sales threshold Walmart designates. If Walmart does not renew the lease, Cost Cutters Family Hair Salon cannot renew the franchisee's Walmart Sublease, leading to the termination of the franchise agreement.
Furthermore, Walmart has the right to compel Cost Cutters Family Hair Salon, and by extension the franchisee, to remodel the salon if Walmart deems it necessary, such as when Walmart remodels the store. This could impose additional costs on the franchisee. The FDD also mentions that if Cost Cutters Family Hair Salon approves a store location outside of Walmart, they reserve the right to require the franchisee to lease directly from the landlord.