What are the cure periods for defaults that can lead to termination of the Extreme Art Studio franchise agreement?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
ing franchisees. |
| Provision | Section in Franchise Agreement and Multi-Franchise Addendum | Summary | |
|---|---|---|---|
| (d) | Termination by franchisee | Section 14.1 | You may terminate the Franchise Agreement if you are in full compliance with the Franchise Agreement and we materially fail to comply with the Franchise Agreement and do not cure within 30 days after you deliver written notice of such material failure, effective an additional 30 days after you deliver written notice of termination, subject to applicable state law. |
| (e) | Termination by franchisor without cause | None | We may not terminate the Franchise Agreement without cause. |
| (f) | Termination by franchisor with cause | Section 14.2 | We may terminate the Franchise Agreement only if you (or your owners or Operating Owner) commit one of several violations. |
| (g) | "Cause" defined curable defaults | Section 14.2 | Ten days to pay amounts owed and obtain required insurance; ten days to cure after notice of violation of law or failure to maintain permit, license or bond; 72 hours to cure health, safety and sanitation violations; 30 days for all other defaults. |
| (h) | "Cause" defined non-curable defaults | Section 14.2 | Material misrepresentation; do not complete initial training program; |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 43–46)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, the cure periods for defaults that can lead to termination vary depending on the nature of the default. Franchisees have ten days to pay any amounts owed to Extreme Art Studio and to obtain required insurance. If a franchisee violates a law or fails to maintain a required permit, license, or bond, they have ten days to correct the issue after receiving notice. For violations related to health, safety, and sanitation, the cure period is 72 hours. All other defaults have a cure period of 30 days.
It is important to note that some defaults are considered non-curable, meaning Extreme Art Studio can terminate the franchise agreement immediately without providing an opportunity to cure. These non-curable defaults include material misrepresentation, failure to complete the initial training program, failure to open an Extreme Art Studio Business within 12 months, employing an unauthorized teacher, failure to maintain insurance, unethical conduct reflecting poorly on the system, unauthorized disclosure of confidential information, failure to maintain operating assets, failure to pay taxes, having insufficient funds on three or more occasions in a 12-month period, understating earnings by more than five percent, cross-defaults, bankruptcy, assignment for the benefit of creditors, abandonment, felony conviction, unauthorized transfer, and repeated violations.
Prospective Extreme Art Studio franchisees should carefully review Section 14.2 of the Franchise Agreement, as referenced in Item 17 of the FDD, to fully understand what constitutes a curable and non-curable default. Understanding these provisions is crucial for maintaining compliance and avoiding potential termination of the franchise agreement. Franchisees should also be aware of the specific actions required to cure a default within the given timeframe to protect their investment and franchise rights.