Does the Deka Lash franchisor have any liability to the landlord before the Effective Date?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
of Financial Institutions 201 West Washington Avenue, 3rd Floor
Madison, WI 53703
EXHIBIT F-1 FRANCHISOR ADDENDUM; CONDITIONAL ASSIGNMENT OF LEASE
THIS FRANCHISOR ADDENDUM AND CONDITIONAL ASSIGNMENT OF LEASE ("Agreement") is made a part of that certain Lease to which it is attached and is dated of even date therewith. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Lease.
WHEREAS, as a condition to the grant of rights under the Franchise Agreement to Tenant, Franchisor requires that Tenant and Landlord enter into this Agreement by their attachment to the Lease to which it is attached.
NOW, THEREFORE, for and in consideration of the execution of the Lease by Landlord and Tenant and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:
- I. Tenant assigns all of its right, title and interest in and to the Lease and the Premises to Franchisor, effective automatically without further action of Tenant upon notice from Franchisor to Landlord. Although it is the intention of the parties that this Agreement may be effective as a present assignment, it is expressly understood and agreed that until an event described below has occurred and Franchisor has exercised its remedies, Landlord shall look to Tenant for full performance of Tenant's obligations under the Lease. In no event shall Franchisor have any liability, duty, or obligation to Landlord under the Lease or otherwise without Franchisor's written consent in its sole discretion.
- II. With the exception of Sections III, IV, VIII, IX below which are effective as of the date this Agreement is fully executed by the parties, the assignment of Lease contemplated hereunder is conditional and shall not be effective until the "Effective Date," as defined in Section 5 of this Agreement. Franchisor shall have no right to assume the Lease unless and until:
- a. Default by Tenant under the terms of the Lease, which default is not cured by Tenant within the time limits provided therein; or
- b. Default by Tenant under the terms of the Franchise Agreement which default is not cured by Tenant within the time limits provided therein; or
- c. Voluntary institution of any insolvency or bankruptcy proceedings as a debtor or insolvent on the part of Tenant or involuntary insolvency or bankruptcy proceedings brought against Tenant which are not dismissed within 60 days of the filing thereof;
- d. Discontinuation by the Tenant of operation of a Deka Lash operation in the Premises, whether voluntarily or involuntarily; or
- e. Nonrenewal by Tenant of the Franchise Agreement
- III. During the term of the Lease, Landlord agrees to give Franchisor written notice of all defaults of Tenant concurrently with the giving of such notice to Tenant. Landlord
- further agrees to give Franchisor a 10 day period to cure such default, or the period provided to the Tenant in the Lease, whichever period shall be longer.
- IV. Nothing in this Agreement shall obligate Franchisor to cure any such default, unless Franchisor agrees in writing in its sole discretion.
- V. The date upon which the assignment shall be effective (the "Effective Date"), is the date upon which Landlord and Tenant receive written notice from Franchisor that:
- a. Franchisor will cure the default of Tenant in the Lease in which Landlord has given notice to Franchisor pursuant to the provisions of Section 3 above, and that Franchisor will assume the Lease; or
- b. The events described in either subsections 2(b), 2(c), 2(d) or 2(e) above have occurred and that Franchisor will assume the Lease.
- VI. As of the Effective Date, Franchisor will assume all rights, duties, responsibilities and obligations of Tenant arising on or after the Effective Date pursuant to the terms and provisions of the Lease.
- VII. Landlord hereby consents to the terms and provisions of this Agreement, and to the assignment of the Lease to Franchisor. Landlord agrees that after the Effective Date, Franchisor may (i) enter into a sublease with any other franchisee of Franchisor without Landlord's further consent, or (ii) further assign the Lease to a franchisee of Franchisor who shall agree to assume Tenant's obligations
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, before the Effective Date, DL Franchising, LLC generally does not have any liability to the landlord under the lease. The "Effective Date" is triggered when the franchisor notifies the landlord and tenant in writing that it will either cure the tenant's default and assume the lease, or that certain events (tenant default under the Franchise Agreement, insolvency proceedings, discontinuation of Deka Lash operation, or nonrenewal of the Franchise Agreement) have occurred and the franchisor will assume the lease.
Prior to the Effective Date, the landlord must primarily look to the franchisee (tenant) for fulfilling lease obligations. However, the landlord is obligated to provide Deka Lash written notice of any franchisee defaults concurrently with notifying the franchisee. Deka Lash is then granted a period of 10 days, or the period provided to the tenant in the lease, whichever is longer, to cure the default, although Deka Lash is not obligated to do so unless it agrees in writing.
This arrangement provides Deka Lash with an option, but not a requirement, to step in and assume the lease if the franchisee defaults, which could be beneficial in maintaining the location for another franchisee or for corporate operations. The landlord benefits from having an additional party (Deka Lash) with the potential to assume the lease and cure defaults, ensuring continued rental income. The franchisee remains primarily responsible for the lease until Deka Lash formally assumes it, transferring the obligations at that time.