What is the 'Minimum Development Obligation' for a Dog Haus Area Developer?
Dog_Haus Franchise · 2025 FDDAnswer from 2025 FDD Document
all other forms of electronic media; (vi) open or operate and to franchise or license others to open or operate Dog Haus Restaurants at any Non-Traditional Venue within and outside of the Development Area regardless of their proximity to any Dog Haus Restaurants developed or under development by Area Developer; (vii) acquire the assets or ownership interests of one or more businesses providing products and services similar to those provided at Dog Haus Restaurants and to franchise, license or create similar arrangements with respect to these businesses once acquired, wherever these businesses (or the franchisees or licensees of these businesses) are located or operating; (viii) be acquired (whether through acquisition of assets, ownership interests or otherwise, regardless of the form of transaction), by any business providing products and services similar to those provided at Dog Haus Restaurants, or by another business, even if such business operates, franchises and/or licenses Competitive Businesses; and (ix) engage in all other activities that this Agreement does not expressly prohibit.
- 2.5 Closures and Assignments. To protect the Dog Haus System, the Dog Haus Marks, the Dog Haus Trade Secrets and the goodwill associated with the same, if, during the Term, Area Developer ceases to operate any Dog Haus Restaurant developed and Opened under this Agreement for any reason, Area Developer must develop a replacement Dog Haus Restaurant (a "Replacement Restaurant") to fulfill Area Developer's obligation to have Open and in operation the required number of Dog Haus Restaurants at the expiration of each Development Period. Area Developer may not, however, cease operating any Dog Haus Restaurant or obtain a Replacement Restaurant without Franchisor's prior written consent. Area Developer must Open each Replacement Restaurant within twelve (12) months after the date of the closing of the Dog Haus Restaurant that it will replace. Dog Haus Restaurants that are operating that are assigned to Affiliates of Area Developer with Franchisor's consent, shall count in determining whether Area Developer has satisfied the Minimum Development Obligation for so long as the applicable Affiliate continues to comply with the terms of this Agreement.
- 2.6 Additional Development Rights. If Area Developer satisfies the Minimum Development Obligation before the Expiration Date and desires to develop, open and operate additional Dog Haus Restaurants in the Development Area, Area Developer shall have the right to extend the Term of this Agreement for an additional five (5) years on the terms and conditions set forth in this Section 2.6. If Area Developer desires to extend the Term of this Agreement for an additional five (5) years, Area Developer shall, no later than one hundred eighty (180) days prior to the Expiration Date, notify Franchisor in writing (the "Additional Development Notice") that Area Developer desires to do so and provide Franchisor with a proposal for the development of additional Dog Haus Restaurants in the Development Area (the "Additional Development Obligation"), setting forth the number of additional Dog Haus Restaurants proposed to be opened by Area Developer, the proposed development fees and the proposed opening dates for each Dog Haus Restaurant during the extended term. Franchisor may, but has no obligation to, grant Area Developer the Additional Development Rights described in this Section 2.6 in its sole and absolute discretion.
- 2.6.1 If the Additional Development Obligation proposed by Area Developer is unacceptable to Franchisor, or if the Parties cannot reach an agreement on an alternative Additional Development Obligation within the thirty (30) day period after the date of the Additional Development Notice, this Agreement shall expire on the Expiration Date. Franchisor and Area Developer shall execute Franchisor's Then-Current Franchise Agreement for each additional Dog Haus Restaurant to be developed and opened in the Development Area by Area Developer.
Source: Item 23 — RECEIPTS (FDD pages 87–328)
What This Means (2025 FDD)
According to the 2025 Dog Haus Franchise Disclosure Document, the Area Developer must open a specific number of Dog Haus restaurants within a designated Development Area during each Development Period, as outlined in the Development Schedule in Exhibit A. This is referred to as the Minimum Development Obligation. The Area Developer must exert their best efforts to meet this obligation by developing, owning, and operating the required number of Dog Haus restaurants.
Failure to adhere to the Development Schedule constitutes a default under the Area Development Agreement, potentially leading to termination of the agreement, unless the failure is due to an event of Force Majeure. In such cases, Dog Haus may extend the deadline for opening a restaurant. To maintain the exclusive rights granted within the Development Area, the Area Developer must remain in Good Standing and fulfill the Minimum Development Obligation.
If the Area Developer satisfies the Minimum Development Obligation before the agreement's expiration date and wishes to develop additional Dog Haus restaurants, they have the option to extend the agreement for an additional five years. This requires notifying Dog Haus in writing and submitting a proposal for an Additional Development Obligation, which includes the number of additional restaurants, proposed development fees, and opening dates. However, Dog Haus has the sole discretion to grant these Additional Development Rights.
Prospective Area Developers should carefully review Exhibit A of the Area Development Agreement to understand the specific Development Schedule and Minimum Development Obligations for their designated area. They should also assess their financial and operational capabilities to ensure they can meet these obligations within the specified timeframes to avoid potential defaults and maintain their exclusive development rights.