Under what conditions can Dq Treat terminate the franchise agreement if a licensee intentionally understates or underreports Gross Sales, continuing license fees, or sales promotion program fees?
Dq_Treat Franchise · 2025 FDDAnswer from 2025 FDD Document
(C) Immediate Termination. Licensee has no right to cure the following defaults and this agreement terminates immediately on Company's issuance of written notice of termination:
(7) Intentionally understating or underreporting Gross Sales, continuing license fees or sales promotion program fees as described in section 9.11(c);
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 Dq Treat's 2025 Franchise Disclosure Document, Dq Treat can immediately terminate the franchise agreement if a licensee intentionally understates or underreports gross sales, continuing license fees, or sales promotion program fees. In this instance, the licensee has no right to cure this default, and the termination is effective immediately upon Dq Treat's written notice.
This provision is a significant protection for Dq Treat, ensuring that franchisees accurately report their sales and remit the appropriate fees. Underreporting sales would deprive Dq Treat of its rightful royalties and could also distort the overall performance data of the franchise system. This immediate termination clause serves as a strong deterrent against such fraudulent behavior.
For a prospective Dq Treat franchisee, this condition underscores the importance of maintaining accurate and transparent financial records. Franchisees must ensure their accounting practices are sound and that they fully understand the reporting requirements outlined in the franchise agreement. Failure to comply, even unintentionally, could lead to accusations of underreporting and potential termination of the franchise.
It is important for potential franchisees to seek clarification from Dq Treat regarding the specific methods and standards for calculating and reporting gross sales, continuing license fees, and sales promotion program fees to avoid any misunderstandings or disputes. Additionally, franchisees should maintain thorough documentation of their sales and fee calculations to protect themselves in the event of an audit or inquiry.