Under what circumstances would Dq Treat consider a Licensee to be in default of their agreement?
Dq_Treat Franchise · 2025 FDDAnswer from 2025 FDD Document
- 13.1 Default. Licensee is in default of this agreement if Company determines that Licensee or any Owner or guarantor has breached any of the terms of this agreement or any other agreement between Licensee and Company or its affiliates, which includes:
- (A) Making any false report to Company;
- (B) Failure to submit to Company the lease (if applicable) for the Authorized Location prior to the Restaurant opening;
- (C) Failure to submit any required report when due;
- (D) Intentionally understating or underreporting, or failure to pay when due any amounts required to be paid to Company or any of Company's affiliates whether under this agreement or otherwise or to any third party as required by this agreement;
- (E) Licensee, an Owner, or a guarantor being charged with any felony or misdemeanor which brings or tends to bring any of the Trademarks into disrepute or impairs or tends to impair the goodwill of any of the Trademarks;
- (F) Failing an evaluation under section 6.8, or failure to abide by Company's standards and requirements in connection with the operation of the Restaurant;
- (G) Violation of the Licensee's confidentiality obligations under this agreement;
- (H) Filing of tax or other liens which may affect this agreement, or voluntary or involuntary bankruptcy, by or against Licensee or any Principal Owner or guarantor, insolvency, making an assignment for the benefit of creditors or any similar voluntary or involuntary arrangement for the disposition of assets for the benefit of creditors; or
- (I) Failure to meet any requirements or specifications established by Company with respect to product quality, physical property, conditions of equipment or materials used, products manufactured, Menu, or use of approved products, packaging or promotional materials.
Source: Item 17 — The following paragraph is added to the end of Item 17 of the Disclosure Document: (FDD pages 70–378)
What This Means (2025 FDD)
According to the 2025 Dq Treat Franchise Disclosure Document, a licensee is considered in default of their agreement if Dq Treat determines that the licensee, any owner, or guarantor has breached any terms of the agreement or any other agreement between the licensee and Dq Treat or its affiliates. This includes several specific instances that could trigger a default.
These instances include making any false report to Dq Treat, failing to submit the lease for the authorized location before the restaurant opens (if applicable), or failing to submit any required report when due. Additionally, intentionally understating or underreporting, or failing to pay amounts owed to Dq Treat, its affiliates, or third parties as required by the agreement, also constitutes a default. If a licensee, owner, or guarantor is charged with any felony or misdemeanor that harms the Trademarks' reputation or goodwill, this is also grounds for default.
Further conditions that could lead to default include failing an evaluation under section 6.8, not abiding by Dq Treat's standards and requirements for restaurant operation, or violating confidentiality obligations. The filing of tax or other liens affecting the agreement, or voluntary or involuntary bankruptcy by or against the licensee, any principal owner, or guarantor, insolvency, making an assignment for the benefit of creditors, or any similar arrangement for asset disposition also constitute default. Finally, failure to meet any requirements or specifications established by Dq Treat regarding product quality, physical property, equipment conditions, products manufactured, menu, or the use of approved products, packaging, or promotional materials can result in a default.
These stipulations are typical in franchise agreements, designed to protect the brand's integrity and ensure consistent operational standards across all franchise locations. A prospective Dq Treat franchisee should carefully review these default conditions to understand their obligations and the potential consequences of non-compliance. Maintaining accurate reporting, timely payments, and adherence to Dq Treat's standards are crucial for avoiding default and maintaining a successful franchise operation.