Who is included in the definition of 'Franchisee' regarding the obligations upon termination or expiration of the Devon Creek Franchise Agreement?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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,
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, the definition of 'Franchisee' regarding obligations upon termination or expiration of the Franchise Agreement includes both the franchisee and each principal. This means that not only is the business entity that signed the agreement responsible for fulfilling the post-termination obligations, but also the individuals considered principals, such as owners or managers, are equally responsible.
This has significant implications for prospective Devon Creek franchisees. It means that individuals involved in the franchise, beyond just the business entity, can be held personally liable for adhering to the terms and conditions that survive the termination or expiration of the agreement. These obligations can include ceasing operation of the franchised business, stopping the use of Devon Creek's trademarks and intellectual property, and paying any outstanding debts to Devon Creek.
The inclusion of principals in these obligations is a fairly common practice in franchising. Franchisors often seek to ensure that all parties with a significant interest in the franchise are bound by the agreement, especially concerning matters like non-compete clauses and protection of intellectual property. This broad definition aims to prevent individuals from circumventing the agreement by simply operating through a different entity or in a personal capacity after the franchise relationship ends.
Therefore, anyone considering investing in a Devon Creek franchise should carefully review the Franchise Agreement and understand the full scope of their obligations, both during the term of the agreement and after its termination or expiration. They should also be aware that these obligations extend not only to the business entity but also to the individuals considered principals, potentially exposing them to personal liability.