What are some examples of non-curable defaults that could lead to termination of the Extreme Art Studio franchise agreement?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
| 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; failure to open an Extreme Art Studio Business within 12 months unauthorized teacher; failure to maintain insurance; unethical conduct reflecting upon system; unauthorized disclosure of Confidential Information; failure to maintain Operating Assets; failure to pay taxes; insufficient funds on three or more occasions in 12 month period; understatement of earning by more than five percent (5%); cross-defaults; bankruptcy; assignment for benefit of creditors; abandonment; felony conviction; unauthorized transfer; repeated violations; and others. |
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, there are specific defaults that, if committed by the franchisee, cannot be cured and may lead to the termination of the franchise agreement. These non-curable defaults include instances such as material misrepresentation during the franchise application process, failure to complete the initial training program, and not opening an Extreme Art Studio Business within 12 months.
Additionally, using an unauthorized teacher, failing to maintain required insurance coverage, or engaging in unethical conduct that reflects negatively on the Extreme Art Studio system are also considered non-curable defaults. Other actions that fall into this category include unauthorized disclosure of confidential information, failure to maintain operating assets necessary for the business, and failure to pay taxes.
Furthermore, the FDD specifies that having insufficient funds on three or more occasions within a 12-month period, understating earnings by more than five percent (5%), or facing bankruptcy can also result in termination without an opportunity to cure the default. Other non-curable defaults include assignment for the benefit of creditors, abandonment of the franchise, a felony conviction, unauthorized transfer of the franchise, and repeated violations of the franchise agreement. These terms are put in place to protect the Extreme Art Studio brand and ensure all franchisees operate to a certain standard.