What conditions apply if Extreme Art Studio elects to purchase my Extreme Art Studio franchise?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
Upon expiration of this Franchise Agreement, if you meet certain conditions, and subject to the terms and conditions of this Section 13, and subject to the terms and conditions of this Franchise Agreement, then you will have the option to acquire a successor franchise to operate the Franchised Business as an Extreme Art Studio Business for an additional term of ten years. If you are signing this franchise agreement as a successor agreement, the references to "term" shall mean the applicable renewal term of the successor agreement. The qualifications and conditions for the successor franchise term are described below.
- 13.1.2 When this Franchise Agreement expires you have the option to acquire a successor franchise commencing immediately upon the expiration of this Franchise Agreement, if:
- (a) you (and each of your owners) have substantially complied with this Franchise Agreement during its term;
- (b) you (and each of your owners) are, both on the date you give us written notice of your election to acquire a successor franchise (as provided in Section 13.2 below) and on the date on which the term of the successor franchise would commence, in full compliance with this Franchise Agreement and all System Standards;
- (c) you add, update, or replace Operating Assets (if necessary) at our request;
- (d) you pay us a successor franchise fee for each successor Extreme Art Studio Business being renewed, in the amount of ten percent (10%) of our then-current Initial Franchise Fee for new franchises (or if we are not offering Franchises at the time of your renewal, the successor franchise fee shall be ten percent (10%) of the initial franchise fee listed in our most recent franchise disclosure document); and
- (e) you: (a) retain the right to use the Studio(s) and agree to renew your lease agreements; or (b) at your option, secure rights to use one or more substitute Studio(s) that
we approve, and you enter into lease agreements with such Studios according to System Standards then-applicable for Extreme Art Studio Businesses;
(f) you agree to sign the franchise agreement we then use to grant franchises for Extreme Art Studio Businesses (modified as necessary to reflect the fact that it is for a successor franchise), which may contain provisions that differ materially from any and all of those contained in this Franchise Agreement. You also agree to complete any additional training programs to meet our then-current standards at your expense.
If you (and each of your owners) are not, both on the date you give us written notice of your election to acquire a successor franchise and on the date on which the term of the successor franchise commences, in full compliance with this Franchise Agreement and all System Standards, you acknowledge that we need not grant you a successor franchise, whether or not we had, or chose to exercise, the right to terminate this Franchise Agreement during its term under Section 14.2.
13.2 GRANT OF A SUCCESSOR FRANCHISE.
- 13.2.1 You agree to give us written notice ("Your Notice") of your election to acquire a successor franchise no more than 12 months and no less than six months before this Franchise Agreement expires. We agree to give you written notice ("Our Notice") not more than three months after we receive your notice, of our decision:
- (a) to grant you a successor franchise;
- (b) to grant you a successor franchise on the condition that you correct existing deficiencies of the Franchised Business or in your operation of the Franchised Business;
- (c) not to grant you a successor franchise based on our determination that you and your owners have not substantially complied with this Franchise Agreement during its term or were not in full compliance with this Franchise Agreement and all System Standards on the date you gave us written notice of your election to acquire a successor franchise; or
- (d) not to grant you a successor franchise if we are no longer offering franchises for Extreme Art Studio Businesses.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, the document does not state any conditions under which Extreme Art Studio may elect to purchase a franchisee's Extreme Art Studio franchise. The document does outline the conditions under which a franchisee may be eligible to acquire a successor franchise agreement.
To be eligible for a successor franchise, the franchisee must meet several conditions. The franchisee and their owners must have substantially complied with the existing Franchise Agreement during its term and be in full compliance with the agreement and all System Standards both when giving written notice of intent to acquire a successor franchise and when the successor term commences. The franchisee may need to update or replace operating assets if requested by Extreme Art Studio. Additionally, the franchisee must pay a successor franchise fee equal to 10% of the then-current initial franchise fee for new franchises. If Extreme Art Studio is not offering franchises at the time of renewal, the fee will be 10% of the initial franchise fee listed in the most recent franchise disclosure document.
Furthermore, the franchisee must retain the right to use the studio and renew lease agreements or secure rights to use substitute studios approved by Extreme Art Studio, entering into lease agreements according to the System Standards. The franchisee must also agree to sign the franchise agreement then in use for granting new franchises, modified to reflect its status as a successor franchise, which may contain materially different provisions from the original agreement. The franchisee must also complete any additional training programs to meet Extreme Art Studio's current standards at their own expense.
It is important to note that if the franchisee and their owners are not in full compliance with the Franchise Agreement and System Standards at the specified times, Extreme Art Studio is not obligated to grant a successor franchise, regardless of whether they had the right to terminate the agreement during its term. The franchisee must provide written notice of their intent to acquire a successor franchise no more than 12 months and no less than six months before the agreement expires. Extreme Art Studio will then provide written notice of their decision within three months, which may include granting a successor franchise, granting it conditionally upon correcting deficiencies, or denying it based on non-compliance or if Extreme Art Studio is no longer offering franchises.