Can Degree Financial terminate the Degree Wellness franchise agreement if the franchisee does not pay them?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
Degree Wellness will perform its obligations under this Agreement if you are in full compliance with all or your duties and obligations to Degree Wellness under this Agreement and the Operations Manual (including any documents incorporated therein).
If you are not in such compliance, we may, in our sole judgment, do any or all of the following until you fully correct the breach or default or Degree Wellness terminates this Agreement:
a. deny you access to the Degree Wellness website or Intranet;
b. remove your Franchised Business from the Franchised Business locator page and/or remove your interior pages, on the Degree Wellness Website;
c. remove your Franchised Business from the list of Franchised Businesses to which inquiries are referred;
d. remove your Franchised Business from the list of Franchised Businesses that are entitled to Degree Wellness-related discounts from approved vendors; and/or
e. remove your Franchised Business from the list of Franchised Businesses that are approved to participate in national or other alliance programs.
Degree Wellness may take any or all of these actions in addition to or instead of giving you notice of default and/or termination under this Agreement. You acknowledge and agree that Degree Wellness's withholding of performance services in accordance with this Section 15.4 will not constitute a breach of this Agreement and/or a defense to the enforcement by us of any provision of this Agreement, including the right to receive payment of Continuing Franchise Fees as provided in Section 6.2. You also acknowledge and agree that, should we choose to withhold performance rather than terminate this Agreement, Degree Wellness's failure to exercise its right to terminate this Agreement will in no way constitute a waiver of its subsequent right to terminate this Agreement for the specified default or for any other default or to exercise any other remedies available to us under this Agreement, at law, or in equity.
Source: Item 10 — Financing (FDD pages 31–32)
What This Means (2025 FDD)
The 2025 Degree Wellness FDD outlines the actions Degree Wellness can take if a franchisee fails to comply with their obligations, including payment. Specifically, Degree Wellness may choose to withhold certain performance services until the franchisee corrects the breach or defaults, or Degree Wellness may terminate the agreement. These actions can include denying access to the Degree Wellness website or intranet, removing the franchised business from the website's locator page, removing the business from lists for referred inquiries, discounts from approved vendors, and approved participation in national or alliance programs.
According to the FDD, Degree Wellness's decision to withhold performance services does not constitute a breach of the agreement, nor does it waive their right to terminate the agreement later for the same or any other default. This means Degree Wellness can choose to work with a struggling franchisee to resolve non-payment issues without giving up their right to terminate the agreement if the issues persist.
If Degree Wellness terminates the agreement due to non-compliance, all rights granted to the franchisee immediately revert back to Degree Wellness. The franchisee may also be responsible for a termination fee, which could amount to one-half of the current initial franchise fee for new Degree Wellness Studio franchises. Additionally, the franchisee may have to pay an amount equal to the average monthly Continuing Franchise Fee, Fund contribution, and Technology Fee multiplied by the number of months remaining in the Term of this Agreement, discounted by a present value discount factor of five percent (5%) and any additional actual, economic, consequential and indirect damages incurred by Degree Wellness. The franchisee is also responsible for all costs and expenses, including attorneys' fees, related to the termination and collection of fees and damages.
While the FDD details Degree Wellness's remedies upon termination, it does not explicitly state that Degree Financial can directly terminate the franchise agreement. However, it does state that Degree Financial provides limited financial services to support the Degree Wellness system. A prospective franchisee should clarify with Degree Wellness the specific circumstances under which Degree Financial might influence or initiate termination proceedings, especially concerning financial obligations.