If the Devon Creek Franchisee fails to perform, is the Franchisee responsible for the costs?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
profits or other business arising from Franchisor's actions and the actions of suppliers.
18. POST-TERMINATION
- 18.1 Franchisee's Obligations. Upon termination or expiration of this Agreement, all rights and licenses granted hereunder to Franchisee shall immediately terminate and Franchisee and each Principal shall:
- 18.1.1 immediately cease to operate the Franchised Business, and shall not thereafter, directly or indirectly identify himself, herself or itself as a current Devon Creek owner, franchisee or licensee;
- 18.1.2 immediately and permanently cease to use the Marks, any imitation of any Mark, Franchisor's copyrighted material or other intellectual property, confidential or proprietary material or indicia of the Franchised Business, or use any trade name, trade or service mark or other commercial symbol that suggests a current or past association with Franchisor, Licensor, or the System. In particular, Franchisee shall cease to use, without limitation, all signs, billboards, advertising materials, displays, stationery, forms and any other articles, which display the Marks;
- 18.1.3 take such action as may be necessary to cancel any assumed name or equivalent registration that contains the Mark or any other service mark or trademark of Franchisor, and Franchisee shall furnish Franchisor with evidence of compliance with this obligation which is satisfactory to Franchisor, within ten (10) days after termination or expiration of this Agreement;
- 18.1.4 promptly pay all sums owing to Franchisor and its affiliates. Such sums shall include all damages, costs and expenses, including reasonable attorneys' fees, incurred by Franchisor as a result of any default by Franchisee. The payment obligation herein shall give rise to and remain, until paid in full, a lien in favor of Franchisor against any and all of the personal property, furnishings, equipment,
- fixtures, and inventory or other business assets owned by Franchisee at the time of default;
- 18.1.5 pay to Franchisor all damages, costs and expenses, including reasonable attorneys' fees, incurred by Franchisor in connection with obtaining any remedy available to Franchisor for any violation of this Agreement and, subsequent to the termination or expiration of this Agreement, in obtaining injunctive or other relief for the enforcement of any provisions of this Agreement that survive its termination;
- 18.1.6 immediately deliver at Franchisee's sole cost and expense, to Franchisor the Manual and all records, files, instructions, correspondence, invoices, agreements, all confidential, proprietary and copyrighted material and all other materials related to operation of the Franchised Business, including but not limited to customer lists and records, (all of which are acknowledged to be Franchisor's property), delete all electronic copies and retain no copy or record of any of the foregoing, except Franchisee's copy of this Agreement and of any correspondence between the parties and any other documents that Franchisee reasonably needs for compliance with any provision of law;
- 18.1.7. in the event this Agreement is terminated due to Franchisee's default, pay Franchisor a lump sum payment (as liquidated damages and not as a penalty) in an amount equal to: (a) the average weekly Royalty Fee and Brand Fund contribution payable by Franchisee over the twelve (12) month period immediately prior to the date of termination (or such shorter time period if the Franchised Business has been open less than twelve (12) months); (b) multiplied by the lesser of (i) thirty-six (36) months or (ii) the number of months then remaining in the then-current term of this Agreement. Franchisee acknowledges that a precise calculation of the full extent of the damages Franchisor will incur in the event of termination of this Agreement as a result of Franchisee's default is difficult to determine and that this lump sum payment is reasonable in light thereof. The liquidated damages payable by Franchisee pursuant to this Section 18.1.7 shall be in addition to all other amounts payable under this Agreement and shall not affect Franchisor's right to obtain appropriate injunctive relief and remedies pursuant to any other provision of this Agreement; and
- 18.1.8 comply with the non-disclosure and non-competition covenants contained in Article 19.
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, if a franchisee defaults on the franchise agreement, they are responsible for covering various costs and expenses incurred by Devon Creek. Specifically, the franchisee must promptly pay all sums owed to Devon Creek and its affiliates, which includes damages, costs, and expenses, including reasonable attorneys' fees, resulting from the franchisee's default. This payment obligation creates a lien in favor of Devon Creek against the franchisee's personal property, furnishings, equipment, fixtures, inventory, and other business assets until the debt is paid in full.
Furthermore, the Devon Creek franchisee is responsible for paying all damages, costs, and expenses, including reasonable attorneys' fees, that Devon Creek incurs while seeking remedies for any violation of the franchise agreement. This includes costs associated with obtaining injunctive or other relief to enforce any provisions of the agreement that survive its termination or expiration.
In addition to the above, Devon Creek emphasizes customer satisfaction and dispute resolution. If a franchisee fails to resolve a customer dispute, Devon Creek may, at its discretion, intervene to protect the system's goodwill and reputation, potentially issuing a refund on the franchisee's behalf. The franchisee is then obligated to reimburse Devon Creek for any amounts refunded to the customer within ten days of receiving notice. Devon Creek is authorized to take payment of these refunded amounts through electronic funds transfer or ACH payment.
These stipulations highlight the financial responsibilities that a Devon Creek franchisee assumes in the event of non-compliance with the franchise agreement or failure to adequately address customer disputes. Prospective franchisees should carefully consider these potential costs and ensure they have sufficient resources to meet these obligations.