What is the required action regarding Operating Assets when renewing an Extreme Art Studio franchise?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, when renewing a franchise agreement, the franchisee may be required to add, update, or replace Operating Assets at the request of Extreme Art Studio. This requirement is part of the conditions that must be met to acquire a successor franchise for an additional ten-year term.
Specifically, to qualify for a successor franchise, the franchisee must substantially comply with the existing Franchise Agreement, be in full compliance with the agreement and all System Standards at the time of renewal, and meet other conditions such as paying a successor franchise fee. The successor franchise fee is ten percent of the then-current Initial Franchise Fee for new franchises, or if Extreme Art Studio is not offering franchises at the time of renewal, ten percent of the initial franchise fee listed in the most recent franchise disclosure document.
Furthermore, Extreme Art Studio may provide notice describing required improvements, technology upgrades, trade dress updates, or modifications needed to bring the Operating Assets into compliance with the System Standards for new Extreme Art Studio businesses. The notice will also state the actions the franchisee must take to correct any operating deficiencies and the time period for correction. The grant of a successor franchise is contingent upon the franchisee's full compliance with the terms of the Franchise Agreement and the obligations outlined in Extreme Art Studio's notice.
If a franchisee fails to cure deficiencies related to the Franchised Business or its operation, Extreme Art Studio will provide written notice of its decision not to grant a successor franchise at least 90 days before the expiration of the current agreement. However, this 90-day notice is not required if the decision not to grant a successor franchise is due to a breach of the Franchise Agreement during the 90-day period before expiration. Franchisees should be prepared to invest in updates or replacements of Operating Assets to meet the then-current System Standards as part of the renewal process.