If a Fitstop franchisee makes false statements about their financial statements to a government entity, is this a curable default according to Section 16.2?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
| d. Termination by franchisee | N/A | No early termination by you. |
|---|---|---|
| e. Termination by franchisor without cause | N/A | No termination by us without cause. |
| f. Termination by franchisor with cause | Section 16.1 | Franchisor can terminate if you are in breach of any term of the Franchise Agreement, if you are in default, if you fail to satisfactorily complete the Training, or if you fail to locate a Premises in the specified period of time. |
| g. "Cause" defined—curable defaults | Section 16.2 | We can terminate you for engaging in conduct that reflects unfavorably on the operation and reputation of the Franchise System and if you fail to cure such default within 24 hours of our notice to you. The following defaults, if not cured within 30 calendar days after we have given you written notice, may result in termination: failure to comply with any provisions of the Franchise Agreement or other agreement between us and you; failure to pay any monies due us or suppliers when due; entering into a contract with or take payment directly from a customer without our approval; failing to submit required financial information to us or a government entity or making false statements about your financial statements to us or a government entity; failing to pay all taxes and employee related withholdings relating to the operation of your franchise; failing to keep your business entity active and in good |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 42–47)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, making false statements about financial statements to a government entity is a curable default. Specifically, Section 16.2 outlines defaults that, if not cured within 30 calendar days after written notice from Fitstop, may result in termination of the franchise agreement.
The FDD states that 'failing to submit required financial information to us or a government entity or making false statements about your financial statements to us or a government entity' is a curable default. This means that if a Fitstop franchisee provides false financial statements to a government entity, Fitstop must provide written notice of the issue. The franchisee then has 30 calendar days to correct the false statements and provide accurate information.
If the franchisee fails to rectify the false statements within the 30-day period, Fitstop has the right to terminate the franchise agreement. This highlights the importance of maintaining accurate and transparent financial records and ensuring compliance with all reporting requirements to both Fitstop and any relevant government entities. Franchisees should take this seriously to avoid potential termination of their franchise agreement.