If a Crawlspace Medic franchisee enters into a composition with creditors, is that a curable default?
Crawlspace_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
Section in Franchise Provision Agreement Summary h. "Cause" defined - non-curable Sections 17.1 and The Franchise Agreement will terminate defaults 17.2 automatically, without notice for the following defaults: insolvency; bankruptcy; written admission of inability to pay debts; receivership; levy; composition with creditors; unsatisfied final judgment for more than 30 days; or foreclosure proceeding that is not dismissed within 30 days. We may terminate the Franchise Agreement upon notice to you if you: do not open the Franchised Business within required time frames; falsify any report to us; cease operations for 5 days or more, unless your vehicle is being repaired/replaced; fail to restore and re open the Franchised Business within 120 days after a casualty; fail to comply with applicable laws; default under any lease for the premises; understate Gross Revenue two (2) or more times; fail to comply with insurance and indemnification requirements; attempt a transfer in violation of the Franchise Agreement; fail, or your legal representative fails to transfer as required upon your death or permanent disability; misrepresent or omit a material fact in applying for the Franchise; are convicted or plead no contest to a felony or crime that could damage the goodwill or reputation of the Marks or the System; receive an adverse judgment in any proceeding involving allegations of fraud, racketeering or improper trade practices or similar claim that could damage the goodwill or reputation of the Marks or the System; conceal revenues or maintain false books; create a threat or danger to public health or safety; refuse an inspection or audit by us; use the Marks, copyrighted material or Confidential Information in an unauthorized manner; make an unauthorized disclosure of Confidential Information; fail to comply with non competition covenants; default in the performance of your obligations three (3) or more times during the term or receive two (2) or more default notices in any 12-month period; default under any other agreement with us or our affiliate; have insufficient funds to honor a check or EFT two (2) or more times within any twelve (12)-month period; fail to maintain Minimum Performance Requirements in any single year of operation; or terminate the Franchise Agreement without cause.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 33–38)
What This Means (2024 FDD)
According to Crawlspace Medic's 2024 Franchise Disclosure Document, if a franchisee enters into a composition with creditors, it is considered a non-curable default. This means that Crawlspace Medic has the right to terminate the Franchise Agreement immediately without providing an opportunity for the franchisee to correct the situation.
This policy has significant implications for prospective franchisees. Should a Crawlspace Medic franchisee face financial difficulties to the point of needing to negotiate with creditors, the franchise agreement can be terminated without recourse. This differs from curable defaults, such as non-payment, where the franchisee has a limited time (5 days) to rectify the issue and maintain the agreement.
Given this clause, prospective Crawlspace Medic franchisees should carefully consider their financial stability and risk tolerance. It is essential to have a solid financial plan and sufficient capital to manage potential economic downturns or unexpected business challenges. Understanding the conditions under which the franchise can be terminated, especially those that are non-curable, is crucial for making an informed investment decision.