What happens if either party defaults on the Floyds 99 Franchise Agreement?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
e provisions of Sections 18.4 and 20.3, the form of which is attached as Exhibit VI to this Agreement. Such consent will subject any interest they may have in this Agreement, in the Shop, or in the Franchisee covered by the option or right of first refusal provided for in said Sections, as applicable (whether a separate property interest, joint ownership property interest, community property interest, or otherwise), to the provisions of those Sections.
20. DEFAULT AND TERMINATION
20.1 Termination by Franchisor Effective Upon Notice. The Franchisor shall have the right, at its option, to terminate this Agreement and all rights granted the Franchisee hereunder, without affording the Franchisee any opportunity to cure any default (subject to any state laws to the contrary, where state law shall prevail), effective upon written notice to the Franchisee, addressed as provided in Section 24.12 upon the occurrence of any of the following events:
- a. Abandonment. If the Franchisee ceases to operate the FLOYD'S 99 Shop or otherwise abandons the FLOYD'S 99 Shop for a period of three consecutive days, or any shorter period that indicates an intent by the Franchisee to discontinue operation of the FLOYD'S 99 Shop, unless and only to the extent that full operation of the FLOYD'S 99 Shop is suspended or terminated due to fire, flood, earthquake or other similar causes beyond the Franchisee's control and not related to the availability of funds to the Franchisee;
- b. Insolvency; Assignments. If the Franchisee becomes insolvent or is adjudicated a bankrupt; or if any action is taken by the Franchisee, or by others against the Franchisee under any insolvency, bankruptcy or reorganization act, (this provision may not be enforceable under federal bankruptcy law, 11 U.S.C. §§ 101 et seq.); or if the Franchisee makes an assignment for the benefit of creditors or a receiver is appointed by the Franchisee;
c. Unsatisfied Judgments; Levy; Foreclosure. If any material judgment (or several judgments which in the aggregate are material) is obtained against the Franchisee and remains unsatisfied or of record for 30 days or longer (unless a supersedeas or other appeal bond has been filed); or if execution is levied against the Franchisee's business or any of the property used in the operation of the FLOYD'S 99 Shop and is not discharged within five days; or if the real or personal property of the Franchisee's business shall be sold after levy thereupon by any sheriff, marshal or constable;
d. Criminal Conviction. If the Franchisee is convicted of a felony, a crime involving moral turpitude, or any crime or offense that is reasonably likely, in the sole opinion of the Franchisor, to materially and unfavorably affect the Licensed Methods, Marks, goodwill or reputation thereof;
e. Failure to Make Payments. If the Franchisee fails to pay any Royalties, National Marketing Contributions, inventory payments, product payments or any other amounts due the Franchisor or its affiliates, including any amounts which may be due as a result of any subleases or lease assignments between the Franchisee and the Franchisor, within 10 days after receiving notice that such fees or amounts are overdue;
f. Misuse of Marks. If the Franchisee misuses or fails to follow the Franchisor's directions and guidelines concerning use of the Franchisor's Marks and fails to correct the misuse or failure within 10 days after notification from the Franchisor;
g. Unauthorized Disclosure. If the Franchisee intentionally or negligently discloses to any unauthorized person the contents of or any part of the Franchisor's Operations Manual or any other trade secrets or confidential information of the Franchisor;
h. Repeated Noncompliance. If the Franchisee has received two previous notices of default from the Franchisor and is again in default of this Agreement within a 12 month period, regardless of whether the previous defaults were cured by the Franchisee; or
i. Unauthorized Transfer. If the Franchisee sells, transfers or otherwise assigns the Franchise, an interest in the Franchise or the Franchisee entity, this Agreement, the FLOYD'S 99 Shop or a substantial portion of the assets of the FLOYD'S 99 Shop owned by the Franchisee without complying with the provisions of Article 18 above.
20.2 Termination by Franchisor Thirty Days' Notice. The Franchisor shall have the right to terminate this Agreement (subject to any state laws to the contrary, where state law shall prevail), effective upon 30 days written notice to the Franchisee, if the Franchisee breaches any other provision of this Agreement and fails to cure the default during such 30 day period. In that event, this Agreement will terminate without further notice to the Franchisee, effective upon expiration of the 30 day period. Defaults shall include, but not be limited to, the following:
- a. Failure to Maintain Standards. The Franchisee fails to maintain the then current operating procedures and adhere to the specifications and standards established by the Franchisor as set forth herein or in the Operations Manual or otherwise communicated to the Franchisee;
- b. Deceptive Practices. The Franchisee engages in any unauthorized business or practice or sells any unauthorized product or service under the Franchisor's Marks or under a name or mark which is confusingly similar to the Franchisor's Marks;
c. Failure to Obtain Consent. The Franchisee fails, refuses or neglects to obtain the Franchisor's prior written approval or consent as required by this Agreement;
d. Failure to Comply with Manual. The Franchisee fails or refuses to comply with the then-current requirements of the Operations Manual; or
e. Breach of Related Agreement. The Franchisee defaults under any term of any sublease or lease assignment for the Franchised Location, any product supply agreement, any security agreement, any other agreement material to the FLOYD'S 99 Shop or any other Franchise Agreement or other contract between the Franchisor, on the one hand, and the Franchisee or a Franchisee affiliate, on the other hand, and such default is not cured within the time specified in such sublease, product supply agreement, other agreement, contract or other Franchise Agreement. The Franchisor will provide the Franchisee the same cure rights with respect to defaults under such other agreements with the Franchisor as the Franchisee has under this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 57–58)
What This Means (2025 FDD)
According to the 2025 Floyds 99 Franchise Disclosure Document, several conditions can trigger a default, leading to termination of the franchise agreement. Floyds 99 can terminate the agreement with written notice if a franchisee abandons the shop for three consecutive days or a shorter period with intent to abandon. Other causes for immediate termination include criminal convictions that could negatively impact Floyds 99's reputation, or repeated noncompliance with the agreement after two prior notices within a 12-month period, regardless of whether the previous defaults were cured. Unauthorized transfers of the franchise also constitute grounds for immediate termination.
Floyds 99 can also terminate the agreement with 30 days' written notice if the franchisee breaches any other provision of the agreement and fails to correct the default within that 30-day period. Examples of such defaults include failing to maintain operating standards, engaging in deceptive practices, failing to obtain required consent, failing to comply with the operations manual, or breaching any related agreement. However, if the breach is curable but cannot be reasonably cured within 30 days, and the franchisee is making good faith efforts to cure it, Floyds 99 may grant an additional reasonable period to cure the breach.
Upon termination or expiration of the agreement, Floyds 99 has the option to purchase the Floyds 99 shop or its assets at fair market value, less any amount attributed to the goodwill of the shop associated with Floyds 99's marks and licensed methods, and less any amounts owed to Floyds 99 by the franchisee. To exercise this option, Floyds 99 must provide written notice to the franchisee no later than the effective date of termination or at least 90 days prior to the expiration of the franchise term. If the parties cannot agree on the fair market value, it will be determined by an independent third-party appraisal, with each party selecting an appraiser and the two appraisers selecting a third. The purchase price will be the median of the values determined by the three appraisers.