What constitutes abandonment of a project by an Epcon Communities franchisee that could lead to termination?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
- 11.3 Franchisee agrees to use its best efforts to complete, within a reasonable time, each Unit begun in connection with any Project so that no Unit remains incomplete for more than two hundred seventy (270) days after commencement of construction.
- 11.4 In the event Franchisee's license to use the Development System at a Project is terminated prior to completion of construction of all Units in the Project, such that Franchisee is prohibited from using the Development System or any part thereof for any reason, Franchisee may, at Franchisor's sole discretion, be granted a limited license by Franchisor to complete construction of any Units then under construction if and only if (i) construction of such Unit(s) has commenced prior to the effective date of termination or alternatively such Unit(s) are the subject of a non-contingent sale-purchase contract between Franchisee and a third-party, and (ii) Franchisee pays Franchisor a Point of Closing Royalty Payment for such Unit(s) pursuant to the terms and conditions herein. In all events, Franchisee's right to complete construction of such Unit(s) shall expire two (2) years after the effective date of termination.
Article 12 Transfer by Franchisee
- 12.1 Franchisee understands and agrees that the rights and duties set forth in this Agreement are personal to Franchisee and that Franchisor has granted this Epcon Communities franchise in reliance on Franchisee's business skills, professional reputation and financial capability.
Accordingly, neither Franchisee nor any shareholder, partner, member, (including shareholders, partners or members of entities that have an ownership interest in Franchisee), or any immediate or remote successor to any part of Franchisee's interest in this Epcon Communities franchise shall, directly or indirectly, sell, assign, transfer, pledge or encumber, by operation of law or otherwise, this Agreement or the franchise or licensed rights granted hereunder or any ownership interest in Franchisee or any ownership interest in any entity owning an interest in Franchisee' without the prior written consent of Franchisor.
Such transfer, sale, assignment, pledge or encumbrance not having the written consent of Franchisor shall be null and void and shall constitute a material breach of this Agreement, for which Franchisor may then terminate this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 86–280)
What This Means (2025 FDD)
According to Epcon Communities' 2025 Franchise Disclosure Document, a franchisee's failure to complete a unit within a reasonable time can be considered a breach of the agreement. Specifically, if a unit remains incomplete for more than 270 days after construction has commenced, it could be viewed as a failure to use best efforts to complete the project.
If the franchise agreement is terminated before all units in a project are completed, the franchisee may be granted a limited license to finish construction at Epcon Communities' sole discretion. This is contingent upon construction having started before the termination date or if there's a non-contingent sale-purchase contract with a third party. The franchisee must also pay a Point of Closing Royalty Payment to Epcon Communities for each unit. However, this right to complete construction expires two years after the termination date.
Additionally, the FDD states that any unauthorized transfer of the franchise agreement or ownership interest in the franchise without prior written consent from Epcon Communities constitutes a material breach of the agreement. This includes any direct or indirect sale, assignment, transfer, pledge, or encumbrance of the agreement. Such a breach gives Epcon Communities the right to terminate the agreement.
Prospective franchisees should be aware of these conditions, as failure to meet construction timelines or attempting to transfer ownership without approval can lead to termination of the franchise agreement. It is important to maintain open communication with Epcon Communities and adhere to the terms outlined in the franchise agreement to avoid potential breaches and ensure the successful completion of projects.