If Crawlspace Medic elects to cure a franchisee's default, who is responsible for the costs incurred?
Crawlspace_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
In the event of a default by Franchisee, in addition to Franchisor's right to terminate the Franchise Agreement, and not in lieu thereof, Franchisor may, but has no obligation to:
- 17.4.1. effect a cure on Franchisee's behalf and at Franchisee's expense, and Franchisee shall immediately pay Franchisor the costs incurred by Franchisor upon demand; or
- 17.4.2. enter upon the Franchised Business or vehicle and exercise complete authority with respect to the operation thereof until such time as Franchisor determines that the default of Franchisee has been cured and that Franchisee is complying with the requirements of this Agreement. Franchisee specifically agrees that a designated representative of Franchisor may take over, control and operate the Franchised Business. In addition to all other fees paid under this Agreement, Franchisee shall pay Franchisor ten percent (10%) of the Gross Revenue generated by the Franchised Business during Franchisor's operation thereof as compensation therefor.
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2024 FDD)
According to Crawlspace Medic's 2024 Franchise Disclosure Document, if Crawlspace Medic elects to cure a franchisee's default, the franchisee is responsible for covering the costs. Specifically, the franchisee must immediately pay Crawlspace Medic the costs incurred upon demand.
In addition to paying for the costs of the cure, if Crawlspace Medic enters the Franchised Business or vehicle, the franchisee must pay Crawlspace Medic ten percent of the Gross Revenue generated by the Franchised Business during Crawlspace Medic's operation. The franchisee must also reimburse Crawlspace Medic for the full compensation paid to the representative, including fringe benefits, travel expenses, lodging, meals, and other expenses reasonably incurred until the default is cured and the franchisee complies with the agreement terms.
This means that a franchisee facing default could incur significant expenses beyond the initial costs that led to the default. These expenses include direct cure costs, a percentage of gross revenue, and compensation for Crawlspace Medic's representatives. Prospective franchisees should carefully consider their financial capacity to handle potential defaults and the associated costs of cure imposed by Crawlspace Medic.