Does CNS Franchising control or have the right to control the Crab N Spice franchisee's business?
Crab_N_Spice Franchise · 2024 FDDAnswer from 2024 FDD Document
ce and are independent covenants by Franchisee. Franchisee shall make all such payments without offset or deduction.
ARTICLE 5. ASSISTANCE
- 5.1 Manual. CNS Franchising shall make its Manual available to Franchisee.
- 5.2 Assistance in Hiring Employees. CNS Franchising shall provide its suggested staffing levels to Franchisee. CNS Franchising shall provide suggested guidelines for hiring employees. All hiring decisions and conditions of employment are Franchisee's sole responsibility.
- 5.3 Assistance in Training Employees. CNS Franchising shall, to the extent it deems appropriate, provide programs for Franchisee to conduct training of new employees.
5.4 Pre-Opening Assistance.
(a) Selecting Location. CNS Franchising shall provide its criteria for Crab N Spice locations to Franchisee. CNS Franchising will review and advise Franchisee regarding potential locations submitted by Franchisee.
(b) Pre-Opening Plans, Specifications, and Vendors. Within a reasonable period of time after the Effective Date, CNS Franchising shall provide Franchisee with (i) CNS Franchising's sample set of standard building plans and specifications and/or standard recommended floor plans; (ii) the applicable System Standards, (iii) other specifications as CNS Franchising deems appropriate (which may include specifications regarding inventory, supplies, materials, and other matters), and (iv) CNS Franchising's lists of Approved Vendors and/or Required Vendors.
(c) Pre-Opening Training. CNS Franchising shall make available its standard preopening training to the Principal Executive and up to 1 other employee, at a Crab N Spice business designated by CNS Franchising. CNS Franchising shall not charge any fee for this training. Franchisee is responsible for its own travel, lodging, meal, and other out-of-pocket expenses. CNS Franchising reserves the right to vary the length and content of the initial training program based on the experience and skill level of any individual attending the program.
(d) Market Introduction Plan. CNS Franchising shall advise Franchisee regarding the planning and execution of Franchisee's market introduction plan.
(e) On-Site Opening Assistance. CNS Franchising shall have a representative support Franchisee's business opening with at least 7 days of onsite opening training and assistance.
5.5 Post-Opening Assistance.
- (a) Advice, Consulting, and Support. If Franchisee requests, CNS Franchising will provide advice to Franchisee (by telephone or electronic communication) regarding improving and developing Franchisee's business, and resolving operating problems Franchisee encounters, to the extent CNS Franchising deems reasonable. If CNS Franchising provides in-person support in response to Franchisee's request, CNS Franchising may charge its then-current fee plus any outof-pocket expenses (such as travel, lodging, and meals for employees providing onsite support).
- (b) Pricing. Upon request, CNS Franchising will provide recommended prices for products and services offered by franchisees of the System.
- (c) Procedures. CNS Franchising will provide Franchisee with CNS Franchising's recommended administrative, bookkeeping, accounting, and inventory control procedures. CNS Franchising may make any such procedures part of required (and not merely recommended) System Standards.
- (d) Marketing. CNS Franchising shall manage the Marketing Fund.
- (e) Internet. CNS Franchising shall maintain a website for Crab N Spice, which will include Franchisee's location (or territory) and telephone number.
ARTICLE 6. LOCATION, DEVELOPMENT, AND OPENING
6.1 Determining Location and Territory.
- (i) Franchisee shall find a potential Location within the Development Area described on the Summary Page Franchisee shall submit its proposed Location to CNS Franchising for acceptance, with all related information CNS Franchising may request. If CNS Franchising does not accept the proposed Location in writing within 30 days, then it is deemed rejected.
- (ii) When CNS Franchising accepts the Location, it shall issue a Location Acceptance Letter in the form of Attachment 1 which states the Location and Territory. CNS Franchising shall determine the Territory in its good faith discretion, substantially in accordance with Item 12 of the Franchise Disclosure Document.
- (iii) CNS Franchising's advice regarding or acceptance of a site is not a representation or warranty that the Business will be successful, and CNS Franchising has no liability to Franchisee with respect to the location of the Business.
- 6.2 Lease. In connection with any lease between Franchisee and the landlord of the Location: (i) if requested by CNS Franchising, Franchisee must submit the proposed lease to CNS
Franchising for written approval, (ii) the term of the lease (including renewal terms) must be for a period of not less than the term of this Agreement, and (iii) Franchisee shall use commercially reasonable efforts to obtain the landlord's signature to a rider to the lease in the form required by CNS Franchising.
- 6.3 Development. Franchisee shall construct (or remodel) and finish the Location in conformity with CNS Franchising's System Standards. If required by CNS Franchising, Franchisee shall engage the services of an architect licensed in the jurisdiction of the Location. Franchisee shall not begin any construction or remodeling work without first obtaining CNS Franchising's approval of Franchisee's plans. CNS Franchising may, but is not required to, inspect Franchisee's construction or remodeling progress at any reasonable time.
Source: Item 22 — CONTRACTS (FDD pages 50–51)
What This Means (2024 FDD)
According to Crab N Spice's 2024 Franchise Disclosure Document, CNS Franchising maintains significant control over various aspects of a franchisee's business operations. This control is exerted through several mechanisms detailed in the franchise agreement. CNS Franchising provides the Manual, suggested staffing levels, and guidelines for hiring employees, though the franchisee is ultimately responsible for hiring decisions. They also offer pre-opening assistance, including location selection criteria, standard building plans, system standards, and lists of approved vendors. Franchisees must adhere to System Standards as determined by CNS Franchising, which covers a wide array of operational aspects.
Franchisees are required to disclose any innovations related to the business, which CNS Franchising will automatically own and have the right to incorporate into the System without compensating the franchisee. CNS Franchising also has the right to access franchisee's email accounts and communication systems if they are provided by the franchisor. Furthermore, CNS Franchising can vary or waive System Standards for specific franchises based on various conditions, but franchisees are not entitled to the same variations or waivers.
Crab N Spice franchisees are obligated to spend at least 2% of gross sales each month on marketing the business, and CNS Franchising has the right to enforce contributions to the Market Cooperative. Franchisees also need prior written approval from CNS Franchising before making any public statements or associating the business with any charitable, political, or religious organization. In cases where CNS Franchising identifies an imminent danger to public health or safety related to the business, the franchisee must temporarily cease operations immediately upon the franchisor's order. These stipulations grant CNS Franchising substantial authority over the franchisee's business conduct and operational decisions.
While franchisees maintain day-to-day management, CNS Franchising's extensive rights enable them to exert considerable influence over the brand's image, standards, and operations. Prospective franchisees should carefully consider these controls and obligations to fully understand the extent of the franchisor's authority and its potential impact on their business.