If a Deka Lash Franchise Agreement entered into to fulfill development obligations is terminated, what impact does this have on the development agreement?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
ent business for three (3) consecutive months, or any shorter period that indicates an intent by Developer to discontinue development of the Franchised Businesses within the Development Area;
- b) Insolvency. If Developer becomes insolvent, meaning unable to pay bills in the ordinary course of business as they become due;
- c) Failure to Meet Development Schedule. If Developer fails to meet its development obligations under the Development Schedule for any Development Period, and fails to cure such default within 30 days of receiving notice thereof; and
- d) Termination of Associated Franchise Agreement(s). If any Franchise Agreement that is entered into in order to fulfill Developer's development obligations under this Agreement is terminated or subject to termination by Franchisor, pursuant to the terms of that Franchise Agreement.
Upon termination of this Agreement, Franchisor may establish or license others to establish Deka Lash units and operations within the previously reserved Development Area without limitation or restriction. In addition, Developer's right to open and operate any of the remaining Franchises that have not yet opened for business in the Development Area is revoked and terminated. This means that Developer will have no further right to construct, equip, own, open or operate additional Deka Lash units which are not, at the time of termination or expiration, the subject of a then-existing Franchise Agreement between Franchisor and Developer which is in full force and effect.
7.
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, the termination of a Franchise Agreement that was entered into to fulfill a developer's obligations under the Development Agreement can lead to the termination of the Development Agreement itself. Specifically, if any Franchise Agreement is terminated or subject to termination by Deka Lash, the franchisor, according to the terms of that Franchise Agreement, it can trigger the termination of the Development Agreement.
Upon termination of the Development Agreement, Deka Lash has the right to establish or license others to establish Deka Lash units within the previously reserved Development Area without any restrictions. Furthermore, the developer's right to open and operate any remaining franchises that have not yet opened for business in the Development Area is revoked. This means the developer loses the right to construct, equip, own, open, or operate additional Deka Lash units that are not already subject to a then-existing Franchise Agreement that is in full force and effect.
However, if the Area Development Agreement is terminated, the franchisee will retain their rights to any open studios, including the territorial rights described in the Franchise Agreement for such studio, provided that the Area Development Agreement was not terminated as a result of failure to comply with the terms of the existing Franchise Agreement(s). The franchisee's rights to any Franchised Studios for which there is no Franchise Agreement and their exclusivity in the Development Area will terminate immediately. Deka Lash then has the right to develop the Development Area on its own or through third parties.