If Endless Summer Sweets cures a default, is the franchisee liable for the costs?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
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- Notice of Default and Opportunity to Cure. Landlord shall provide Franchisor with copies of any written notice of default ("Default") given to Tenant under the Lease, and Landlord grants to Franchisor the option (but not the obligation) to cure any Default under the Lease (should Tenant fail to do so) within ten (10) days after the expiration of the period in which Tenant may cure the Default.
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- Assignment and Subletting. Notwithstanding any provision of the Lease to the contrary, Tenant shall have the right to assign or sublet the Lease to Franchisor, provided that no such assignment or sublease shall relieve Tenant or any guarantor of liability under the Lease.
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to the 2024 Endless Summer Sweets Franchise Disclosure Document, if a franchisee (referred to as Tenant in the lease agreement excerpt) defaults on their lease, the landlord is required to provide Endless Summer Sweets (referred to as Franchisor) with a copy of the default notice. Endless Summer Sweets then has the option, but not the obligation, to cure the default if the franchisee fails to do so within the allotted cure period. The document does not explicitly state who is liable for the costs incurred by Endless Summer Sweets should they choose to cure the default.
However, the lease agreement stipulates that if Endless Summer Sweets takes over the lease due to the franchisee's default, the original franchisee's liability under the lease is not relieved. This suggests that the franchisee may ultimately be responsible for costs associated with the default, even if Endless Summer Sweets initially covers them. The FDD also states that upon termination or expiration of the Franchise Agreement, the franchisee must pay all amounts owed to Endless Summer Sweets.
Prospective Endless Summer Sweets franchisees should seek clarification from the franchisor regarding liability for default-related costs if Endless Summer Sweets elects to cure a default. Understanding the specific financial responsibilities in such a scenario is crucial for assessing the overall risks and potential expenses associated with the franchise.