Is the franchisee required to open a certain number of Endless Summer Sweets locations?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
| 3. | Development Area. Franchisee shall locate each Endless Summer Sweets business it develops under this MUDA within the following area: | ||
|---|---|---|---|
| effect | (the "Development Area"). Franchisee has | ||
| exclusive rights to develop, open or | |||
| operate Endless Summer Sweets businesses in the Development Area | |||
| while this agreement is in | |||
| 4. | Default and Termination. Franchisor may terminate this MUDA by giving notice to | ||
| Franchisee, without opportunity to cure, if any of the following occur: | |||
| (i) | Franchisee fails to satisfy the development schedule; or | ||
| (ii) | Franchisor has the right to terminate any franchise agreement between Franchisor | ||
| and Franchisee (or any affiliate thereof) due to Franchisee's default thereunder | |||
| (whether or not Franchisor actually terminates | |||
| such franchise agreement). | |||
| 5. | Limitation of Liability. Franchisee's | ||
| commitment to develop Endless Summer Sweets | |||
| businesses is in the nature of an option only. If Franchisor terminates this MUDA for Franchisee's | |||
| default, Franchisee shall not be liable to Franchisor for lost future revenues or profits from the | |||
| unopened Endless Summer Sweets | |||
| businesses. | |||
| 6. | Conditions. Franchisee's right to develop each Endless Summer Sweets | ||
| franchise after the | |||
| first franchise is subject to the following: | |||
| (i) | Franchisee must possess sufficient financial and organizational capacity to develop, | ||
| open, operate, and manage each additional Endless Summer Sweets | |||
| business, in the | |||
| reasonable judgment of Franchisor, and | |||
| (ii) | Franchisee must be in full compliance with all brand requirements at its open and | ||
| operating | |||
| Endless Summer Sweets | |||
| businesses, and not in default under any | |||
| Franchise Agreement or any other agreement with Franchisor. | |||
| 7. | Dispute Resolution; Miscellaneous. The laws of the State of California | ||
| (without giving | |||
| effect to its principles of conflicts of law) govern all adversarial proceedings between the parties. | |||
| The parties agree that any California law for the protection of franchisees or business opportunity | |||
| purchasers will not apply unless its jurisdictional requirements are met independently without | |||
| reference to this Section 7. | |||
| Franchisee shall not Transfer this MUDA without the prior written | |||
| consent of Franchisor, and any | |||
| Transfer without Franchisor's prior written consent shall be void. | |||
| The provisions of Article 17 (Dispute Resolution) and Article 18 (Miscellaneous) of the Franchise | |||
| Agreement apply to and are incorporated into this MUDA as if fully set forth herein. | |||
| Agreed to by: | |||
| FRANCHISOR: | |||
| Endless Summer Sweets Franchising, Inc. |
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to the 2024 Endless Summer Sweets FDD, the standard franchise agreement grants the franchisee the right to operate one Endless Summer Sweets business at a specific location. The franchisee is obligated to develop, open, and operate the Endless Summer Sweets business at that location for the entire term of the agreement. This suggests that under a standard franchise agreement, there is no requirement to open multiple locations. However, the FDD also mentions a "MUDA" or Multi-Unit Development Agreement.
The MUDA outlines the terms under which a franchisee can develop multiple Endless Summer Sweets businesses within a defined Development Area. The franchisee's right to develop each franchise after the first one is contingent upon having sufficient financial and organizational capacity, as determined by Endless Summer Sweets, and being in full compliance with brand requirements at their existing Endless Summer Sweets businesses. Failure to meet the development schedule outlined in the MUDA can result in termination of the agreement by Endless Summer Sweets.
It's important to note that the commitment to develop Endless Summer Sweets businesses under a MUDA is characterized as an option. If Endless Summer Sweets terminates the MUDA due to the franchisee's default, the franchisee will not be liable for lost future revenues or profits from unopened Endless Summer Sweets businesses. This indicates that while a development schedule is expected under a MUDA, there are limitations to the liability if the franchisee fails to meet it. Prospective franchisees should carefully evaluate their capacity and resources before entering into a MUDA with Endless Summer Sweets, and should clarify the details of the development schedule and termination conditions.