What constitutes 'good cause' for Crab N Spice to terminate a franchise agreement?
Crab_N_Spice Franchise · 2024 FDDAnswer from 2024 FDD Document
(7) Permitting unilateral termination of the franchise if such termination is without good cause or in bad faith. Good cause within the meaning of this subsection (7) includes any material violation of the franchise agreement.
(v) Franchisee loses possession of the Location;
(vi) Franchisee or any Owner commits a material violation of Section 7.2 (compliance with laws) or Section 13.1 (confidentiality), violates Section 13.2 (non-compete) or Article 15 (transfer), or commits any other violation of this Agreement which by its nature cannot be cured;
(vii) Franchisee abandons or ceases operation of the Business for more than five consecutive days;
(viii) Franchisee or any Owner slanders or libels CNS Franchising or any of its employees, directors, or officers;
(ix) Franchisee refuses to cooperate with or permit any audit or inspection by CNS Franchising or its agents or contractors, or otherwise fails to comply with Section 10.5 or Section 11.2;
(x) the Business is operated in a manner which, in CNS Franchising's reasonable judgment, constitutes a significant danger to the health or safety of any person, and Franchisee fails to cure such danger within 48 hours after becoming aware of the danger (due to notice from CNS Franchising or otherwise);
(xi) Franchisee has received two or more notices of default and Franchisee commits another breach of this Agreement, all in the same 12-month period;
(xii) CNS Franchising (or any affiliate) terminates any other agreement with Franchisee (or any affiliate) due to the breach of such other agreement by Franchisee (or its affiliate) (provided that termination of a Multi-Unit Development Agreement with Franchisee or its affiliate shall not give CNS Franchising the right to terminate this Agreement); or
(xiii) Franchisee or any Owner is accused by any governmental authority or third party of any act that in CNS Franchising's opinion is reasonably likely to materially and unfavorably affect the Crab N Spice brand, or is charged with, pleads guilty to, or is convicted of a felony.
Source: Item 22 — CONTRACTS (FDD pages 50–51)
What This Means (2024 FDD)
According to the 2024 Crab N Spice Franchise Disclosure Document, 'good cause' for termination includes any material violation of the franchise agreement. The agreement outlines specific instances that would allow CNS Franchising to terminate the franchise agreement.
These instances include if the franchisee loses possession of the location, commits a material violation of compliance with laws or confidentiality, violates non-compete agreements or transfer restrictions, or commits any other violation that cannot be cured. Abandoning the business for more than five consecutive days, slandering or libeling CNS Franchising or its employees, refusing to cooperate with audits or inspections, or failing to comply with specific sections of the agreement also constitute grounds for termination.
Further reasons for termination include operating the business in a way that poses a significant danger to health or safety without rectifying it within 48 hours, receiving two or more default notices within a 12-month period and then committing another breach, or CNS Franchising terminating another agreement with the franchisee due to a breach of that agreement. Finally, if the franchisee or any owner is accused of an act that could unfavorably affect the Crab N Spice brand, or is charged with, pleads guilty to, or is convicted of a felony, Crab N Spice has grounds for termination.