Can Engel & Volkers reduce or eliminate the Protected Area as a consequence of franchisee default?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
such lease expires or is otherwise terminated;
- 20.4.4 commits a breach of Section 23.2 (Ownership in Franchisee's Company);
- 20.4.5 or the Estate fails to comply with Section 22.4 (Assignment Upon Death or Disability);
- 20.4.6 or any of its affiliates is in default under any other franchise agreement or other agreement with Franchisor or one of its affiliates, which is not curable, or, if such default is curable and a notice to cure has been provided to Franchisee or its applicable affiliate, Franchisee or its applicable affiliate has not cured such default within the applicable cure period.
- 20.5 Optional Remedy**:** If Franchisee fails to timely pay any amounts due to Franchisor or one of its affiliates, or if Franchisee is in material breach of any obligation under this Agreement, Franchisor may, in addition to or in lieu of its remedy under Section 20.4 or otherwise provided in this Agreement: (i) withhold Franchisee's access to the Integrated Product Suite described in Section 7 and any other services or goods, such as the GG Magazine, that Franchisor or its affiliates are obligated to provide hereunder until such time as Franchisee's payments are current; and/or (ii) rescind any terms to this Agreement that were negotiated between the parties, including reducing Franchisee's Protected Area. Examples of material breaches of Franchisee's obligations under this Agreement include failure to timely pay any amounts due when payable and failure to timely submit reports required hereunder.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, the franchisor can reduce the franchisee's Protected Area under certain default conditions. Specifically, if the franchisee fails to pay amounts due to Engel & Volkers or materially breaches any obligation under the franchise agreement, Engel & Volkers has the option to rescind negotiated terms, including reducing the Protected Area. This is in addition to, or in place of, other remedies available to Engel & Volkers.
Examples of defaults that can lead to a reduction of the Protected Area include failing to make timely payments or submit required reports. The FDD specifies that Engel & Volkers may choose to withhold access to the Integrated Product Suite and other services until payments are current, or they may reduce the Protected Area. This provides Engel & Volkers with recourse if a franchisee is not meeting their financial obligations or is otherwise in breach of the agreement.
Additionally, Engel & Volkers can terminate the agreement or reduce or eliminate the Protected Area without providing an opportunity to cure the default if the franchisee fails to secure an approved location or start operating by the opening date. This highlights the importance of franchisees meeting initial setup and operational deadlines to maintain their protected territory. This clause gives Engel & Volkers significant power to adjust the franchisee's territory in response to various breaches of the franchise agreement.