What is the nature of the franchisee's commitment to develop Endless Summer Sweets businesses under the MUDA?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
ously with this MUDA. For each additional franchise, Franchisee shall execute Franchisor's then-current standard form of franchise agreement no later than three business days after Franchisee leases or acquires a location for the franchise. This MUDA does not give Franchisee the right to construct, open, or operate an Endless Summer Sweets business, and Franchisee acknowledges that Franchisee may construct, open, and operate each Endless Summer Sweets business only pursuant to a separate franchise agreement executed pursuant to this MUDA for each Endless Summer Sweets business.
| 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. |
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to the 2024 Endless Summer Sweets FDD, the franchisee's commitment to develop Endless Summer Sweets businesses under the Multi-Unit Development Agreement (MUDA) is characterized as an option. While the franchisee is expected to adhere to a development schedule, Endless Summer Sweets states that if the MUDA is terminated due to the franchisee's default, the franchisee will not be held liable for lost future revenues or profits from unopened Endless Summer Sweets businesses.
The franchisee must locate each Endless Summer Sweets business within the designated Development Area, and they have exclusive rights to develop, open, and operate Endless Summer Sweets businesses in that area while the agreement is in effect. However, the right to develop each franchise after the first one is contingent upon the franchisee maintaining sufficient financial and organizational capacity, as judged by Endless Summer Sweets, and being in full compliance with all brand requirements at its open and operating businesses, without being in default under any agreement with Endless Summer Sweets.
Endless Summer Sweets can terminate the MUDA if the franchisee fails to meet the development schedule or if Endless Summer Sweets has the right to terminate any other franchise agreement with the franchisee due to default. The franchisee is required to pay the total initial franchise fees upon execution of the MUDA, which are non-refundable. For each additional franchise beyond the first, the franchisee must execute Endless Summer Sweets' then-current standard form of franchise agreement within three business days of leasing or acquiring a location. The MUDA itself does not grant the franchisee the right to construct, open, or operate an Endless Summer Sweets business; these rights are granted only through separate franchise agreements.