Does the Extreme Art Studio Multi-Franchise Addendum affect the length of the initial franchise term?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in Franchise Agreement and Multi-Franchise Addendum | Summary |
|---|---|---|
| (a) Length of the franchise term | Section 1.4 of Franchise Agreement and Section 5 of Multi-Franchise Addendum (Exhibit H-7) | 10 years. The Multi-Franchise Addendum terminates upon termination or expiration of the Franchise Agreement. |
| (b) Renewal or extension of the term | Section 13.1 | One additional ten-year term, if you meet the requirements. |
| (c) Requirements for franchisee to renew or extend | Section 13 | The term "renewal" refers to extending our franchise relationship at the end of your initial term and any other renewal or extension of the initial term. Your successor franchise rights permit you to remain as a Franchise after the initial term of your Franchise Agreement expires. You must provide written notice; full compliance; sign then-current form of franchise agreement; sign release; maintain possession of Studio location; complete refurbishing; pay successor franchise fee; and others. You must sign our then-current Franchise Agreement and ancillary documents for the successor term, and this new franchise agreement may have materially different terms and conditions (including, e.g., higher Royalty and advertising contributions) from the Franchise Agreement that covered your original term. The boundaries of your Territory may change, and the fees on renewal will not be greater than the fees that we then impose on similarly situated renewing franchisees. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 43–46)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, the Multi-Franchise Addendum does affect the length of the initial franchise term. The initial franchise term is 10 years, as detailed in both Section 1.4 of the Franchise Agreement and Section 5 of the Multi-Franchise Addendum. The FDD specifies that the Multi-Franchise Addendum terminates upon the termination or expiration of the Franchise Agreement.
For a prospective franchisee, this means that if you sign a Multi-Franchise Addendum, the agreement covering multiple franchise locations will end automatically if the initial Franchise Agreement for your first location is terminated or expires. This could have significant implications for your expansion plans, as the rights to develop additional locations under the Multi-Franchise Addendum would cease.
It is also important to note the conditions for renewal. Extreme Art Studio offers one additional ten-year term, provided the franchisee meets specific requirements. These requirements include providing written notice, demonstrating full compliance with the existing agreement, signing the then-current form of the franchise agreement, and executing a release. Franchisees must also maintain possession of the studio location, complete any required refurbishing, and pay a successor franchise fee. The new franchise agreement for the renewal term may contain materially different terms and conditions, including potentially higher royalty and advertising contributions. The territory boundaries could also change upon renewal. However, the fees on renewal will not be greater than the fees that Extreme Art Studio imposes on similarly situated renewing franchisees.