What happens if a Dog Haus franchisee makes material misrepresentations related to the franchise agreement or restaurant operations?
Dog_Haus Franchise · 2025 FDDAnswer from 2025 FDD Document
16.2.7 If an audit or investigation conducted by Franchisor discloses that Franchisee has knowingly maintained false books or records, or submitted false reports to Franchisor, or knowingly understated its Gross Sales or withheld the reporting of the same as provided in this Agreement.
16.2.9 If Franchisee materially misuses or makes any unauthorized use of the Dog Haus Marks or otherwise materially impairs the goodwill associated therewith or Franchisor's rights therein, or takes any action which reflects materially and unfavorably upon the operation and reputation of the Franchised Restaurant or the Dog Haus chain generally.
16.7 Interim Management.
To protect the Dog Haus System, the Dog Haus Marks, the Dog Haus Trade Secrets and the goodwill associated with the same, after Franchisor has given Franchisee written notice that Franchisee is in Default, Franchisor may (but is not obligated to) assume interim management of the Franchised Restaurant during the pendency of any cure period or in lieu of immediately terminating this Agreement.
If Franchisor elects to assume interim management of the Franchised Restaurant (i) Franchisor's election will not relieve Franchisee of Franchisee's obligations under this Agreement; (ii) Franchisor will not be liable for any debts, losses, costs or expenses incurred in the operation of the Franchised Restaurant during any interim management period; (iii) Franchisor will charge the Interim Management Fee, currently $500 per day, plus the actual out of pocket costs Franchisor incurs for the management services (the "Interim Management Fee"); and (iv) Franchisee agrees to, and hereby does, indemnify and hold Franchisor harmless against any and all claims, demands, judgments, fines, losses, liabilities, costs, amounts paid in settlement and reasonable expenses (including, but not limited to attorneys' fees) incurred in connection with the interim management of the Franchised Restaurant, other than those arising solely from the gross negligence or willful misconduct of Franchisor.
Source: Item 22 — CONTRACTS (FDD page 87)
What This Means (2025 FDD)
According to Dog Haus's 2025 Franchise Disclosure Document, if a franchisee knowingly maintains false books or records, submits false reports to the franchisor, or knowingly understates or withholds gross sales reporting, it constitutes grounds for termination of the franchise agreement. Additionally, if a Dog Haus franchisee materially misuses the Dog Haus Marks or impairs the associated goodwill, or takes any action that reflects unfavorably on the restaurant's operation or the Dog Haus chain, this can also lead to termination.
These stipulations are significant for prospective franchisees as they highlight the importance of accurate financial reporting and adherence to brand standards. Franchisees must ensure their operations align with the franchisor's expectations and that all financial records are transparent and truthful. Failure to comply can result in the loss of the franchise.
Dog Haus also has the right to assume interim management of the restaurant if the franchisee is in default, to protect the Dog Haus System, Dog Haus Marks, Dog Haus Trade Secrets and the goodwill associated with the same. During this period, the franchisee remains responsible for their obligations under the agreement and must cover an Interim Management Fee, currently $500 per day, plus any out-of-pocket costs incurred by Dog Haus for management services. This interim management option provides Dog Haus with a mechanism to stabilize a struggling franchise while considering long-term solutions, but does not relieve the franchisee of their financial responsibilities or potential liabilities.