Under what circumstances can the Deka Lash Development Agreement be terminated early by the Franchisor?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
that the final Franchised Business is required to be opened and operating under the Development Schedule or b) the date you execute a lease for the final Franchised Business required to be opened and operating under the Development Schedule. Upon expiration or termination of this Agreement for any reason, you will not have any rights within the Development Area other than the territorial rights granted in the franchise agreement executed in connection with any Franchised Businesses that you have opened and commenced operating as of the date this Agreement is terminated or expires.
- 6.2 Termination. Any material violation or breach of any Franchise Agreement or this Agreement will be deemed a material violation of this Agreement and any and all Franchise Agreements between the parties. The non-breaching party will be entitled to enforce the penalties of or to terminate this Agreement or the relevant Franchise Agreement(s) as provided in the relevant Franchise Agreement(s) for enforcement or termination. In addition, Franchisor will have the right, at its option, to terminate this Agreement and all rights granted to Developer hereunder, without affording Developer any opportunity to cure such default, effective upon written notice to Developer, upon the occurrence of any of the following events:
- a) Cease to Actively Engage. If Developer ceases to actively engage in development activities in the Development Area or otherwise abandons its development 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.
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, the franchisor has specific rights to terminate the Development Agreement early under certain conditions. Deka Lash can terminate the agreement if the developer ceases to actively engage in development activities within the designated area for three consecutive months, or any shorter period that indicates an intent to discontinue development. Additionally, Deka Lash can terminate the agreement if the developer becomes insolvent, meaning they are unable to pay their bills in the ordinary course of business as they become due.
Furthermore, Deka Lash can terminate the Development Agreement if the developer fails to meet the development obligations outlined in the Development Schedule for any Development Period and does not correct this failure within 30 days of receiving notice. Another cause for termination is if any Franchise Agreement entered into to fulfill the developer's obligations is terminated or subject to termination by Deka Lash, according to the terms of that Franchise Agreement.
Upon termination, Deka Lash has the right to establish or license others to establish Deka Lash units within the previously reserved Development Area without any restrictions. The developer's right to open and operate any remaining franchises that have not yet opened for business in the Development Area is also 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 fully active Franchise Agreement between the franchisor and the developer at the time of termination.
These termination clauses are important for potential Deka Lash developers to consider, as failure to meet development schedules, indications of discontinued development, insolvency, or termination of associated franchise agreements can all lead to the early termination of the Development Agreement and loss of development rights.