Under what circumstances can Engel & Volkers terminate the franchise agreement without giving the franchisee an opportunity to cure?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
hisee, the franchised Business or any affiliate or Guarantor thereof; Franchisee, any affiliate of Franchisee or any Guarantor are dissolved; execution is levied against Franchisee, the franchised Business, any affiliate or Guarantor thereof and/or the property of any of the foregoing; the property of the franchised Business is sold after levy thereon by any governmental body or agency, sheriff, marshal or other person authorized under federal, state and/or local law; or, if Franchisee is a business entity, its governing body adopts any resolution or otherwise authorizes action to approve any of the foregoing activities.
20.3 Termination by Franchisor Without Opportunity to Cure: Franchisee shall be deemed to be in default under this Agreement, and Franchisor may, at its option, terminate this Agreement and all rights granted herein effective immediately or reduce or eliminate the Protected Area by written notice to Franchisee, without giving Franchisee an opportunity to cure the default, if Franchisee either:
- 20.3.1 fails to timely find and secure Franchisor approval of its Approved Location in accordance with the provisions of Section 3.1;
- 20.3.2 fails to start operating its Engel & Völkers Residential Real Estate Brokerage by the Opening Date;
- 20.3.3 fails to operate its Residential Real Estate Brokerage for seven (7) consecutive days or otherwise abandons its Residential Real Estate Brokerage, or uses the Residential Real Estate Brokerage for any purpose prohibited by Section 3.2;
- 20.3.4 falls more than thirty (30) days into arrears with payments due to Franchisor or one of its affiliates;
- 20.3.5 commits a breach of the confidentiality undertakings set forth in Section 15;
- 20.3.6 commits a breach of the non-competition provisions set forth in Section 16 or one of the Principals commits a breach of the Confidentiality Agreement and Covenant Not To Compete;
- 20.3.7 is, or one of its Principals, business managers, owners, members, shareholders, or directors, commits or has been committing an act of moral turpitude or engages or has engaged in other acts that are likely to have a materially adverse effect on the ENGEL & VÖLKERS System, the Trademarks, the goodwill associated with the Trademarks or Franchisor's interest in the ENGEL & VÖLKERS System or Trademarks, or is or has been convicted of, or plead or has plead either guilty or no contest to, a felony, fraud, crime involving moral turpitude, or any other crime or lesser offense which Franchisor reasonably believes is related to Franchisee's duties under this Agreement and/or Franchisee's operation of the franchised Business or is likely to have an adverse effect on the ENGEL & VÖLKERS System, the Trademarks, the goodwill associated with the Trademarks or Franchisor's interest in the ENGEL & VÖLKERS System or Trademarks;
- 20.3.8 is liquidated;
- 20.3.9 fails to obtain or maintain the licenses required for its business operation, including not having at any time a broker of record who holds the broker license required at the Approved Location;
- 20.3.10 violates Section 26.11 (Compliance with Laws) of this Agreement;
- 20.3.11 makes a willful misrepresentation or does not make a material disclosure required by any governmental authority regarding any matter involving or affecting Franchisee's obligations under this Agreement or the operations of the franchised Business;
20.3.12 is, or any of Franchisee's affiliates is, in default under any franchise agreement or other agreement with Franchisor or its affiliates, which default is: (i) not curable; or (ii) is curable and a notice to cure has been provided to Franchisee or Franchisee's affiliate, as the case may be, and the default has not cured such default within the applicable cure period. Furthermore, any default under this Agreement by Franchisee will be deemed a default under any and all agreements between Franchisor or its affiliates on one hand, and Franchisee or its affiliates on the other hand, permitting Franchisor or its affiliate that is party to any such agreement to terminate it in the same manner provided for in this Agreement for termination hereof;
20.3.13 omitted or misrepresented any material fact in the information Franchise furnished to Franchisor in connection with Franchisor's decision to enter into this Agreement;
20.3.14 agrees with Franchisor in a mutually signed writing to terminate this Agreement;
20.3.15 purports or, if Franchisee is a business entity, any owner or principal of Franchisee purports, to transfer any rights or obligations under this Agreement, any interest in Franchisee or in the franchised Business to any third party in violation of the terms of this Agreement;
20.3.16 uses or duplicates any aspects of the ENGEL & VÖLKERS System, services, programs or products in an unauthorized fashion;
20.3.17 engages in any business or markets any service or product under a name or mark which, in Franchisor's opinion, is confusingly similar to the Trademarks;
20.3.18 abandons or ceases to operate the franchised Business and/or any ENGEL & VÖLKERS Residential Real Estate Brokerage operated by Franchisee or its affiliates;
20.3.19 knowingly conceals revenues, maintains false books or records, falsifies information or otherwise defrauds or makes false representation to Franchisor or submits any substantially false report to Franchisor;
20.3.20 does not maintain the financial records required by Section 13 of this Agreement;
20.3.21 is found by Franchisor or its designees, after conducting an audit of the franchised Business, that any periodic report or statement which Franchisee submitted to Franchisor understated Franchisee's Gross Revenues by 2% or more, at least three times within any 36-month period, or by 5% or more for the applicable reporting period;
20.3.22 refuses Franchisor permission to inspect, or to conduct an operational and/or financial audit of, the franchised Business or any other Franchisee-operated ENGEL & VÖLKERS Residential Real Estate Brokerages.
20.3.23 takes, withholds, misdirects or appropriates for its own use any funds withheld from Franchisee's employees' wages which by law should have been set aside for the franchised Business' employee taxes, FICA, insurance or benefits or
wrongfully takes or appropriates for its own use ENGEL & VÖLKERS' or Franchisor's property or funds, or systematically fails to deal fairly and honestly with its employees, contractors, customers, Sales Advisors or suppliers, or knowingly permits or, having discovered the facts, fails to take any action against, or to discharge, an agent, servant or employee who has embezzled ENGEL & VÖLKERS' or Franchisor's funds or property or that of any customers/clients or others;
- 20.3.24 after curing a default which is subject to cure under Section 20.4 below, Franchisee commits the same act of default again within six (6) months;
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, there are several circumstances under which Engel & Volkers can terminate the franchise agreement immediately, without providing the franchisee an opportunity to cure the default. These include failing to secure Franchisor approval of the Approved Location, failing to start operating its Engel & Völkers Residential Real Estate Brokerage by the Opening Date, after curing a default which is subject to cure, committing the same act of default again within six months, interfering with Engel & Volkers' contractual relations, engaging in any act or practice that subjects the franchisee and/or Engel & Volkers to widespread publicity, ridicule, or derision, breaching advertising standards without curing the breach within three days of written notice, or having any license or governmental authorization necessary for the business revoked or terminated.
Additional reasons for immediate termination include engaging in any act or conduct that specifically authorizes Engel & Volkers to terminate the agreement immediately upon notice, violating compliance with laws, making a willful misrepresentation or not making a material disclosure required by any governmental authority, being in default under any agreement with Engel & Volkers or its affiliates that is not curable or has not been cured within the applicable period, omitting or misrepresenting any material fact in the information furnished to Engel & Volkers, agreeing with Engel & Volkers in writing to terminate the agreement, or attempting to transfer any rights or obligations under the agreement in violation of its terms.
Further grounds for immediate termination without opportunity to cure involve using or duplicating any aspects of the Engel & Volkers system in an unauthorized fashion, engaging in any business or marketing any service or product under a confusingly similar name or mark, abandoning or ceasing to operate the franchised business, being adjudicated as bankrupt or insolvent, assigning assets for the benefit of creditors, filing a bankruptcy petition that is not contested and dismissed within 60 days, consenting to an order for relief in an involuntary proceeding, consenting to the appointment of a receiver, or having proceedings for a composition with creditors instituted. If the franchisee is a business entity, Engel & Volkers can also terminate the agreement without an opportunity to cure if its governing body authorizes any of the aforementioned activities.
These termination conditions are fairly typical in franchising, as franchisors need to protect their brand and system standards. However, prospective Engel & Volkers franchisees should carefully consider these conditions and understand the potential risks of immediate termination, as it could have significant financial and operational consequences.