What will be determined in the second phase of the arbitration involving Golden Krust Caribbean Restaurant?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
nded December 31, 2023, were purchased from three suppliers. Approximately 53% of goods purchased during the years ended December 31, 2023, were purchased from one supplier
NOTE 13 RISKS AND UNCERTAINTIES
The Company is involved in various court cases and legal proceedings, most of which, the company believes will have outcomes in its favor, or it has already been awarded damages that are being contested by the other party(ies). No accrual has been made for potential legal settlements or awards that the company believes it is entitled to, as they have not yet been received by the Company. In addition, the Company is a party to a lawsuit with a former franchisee, whose franchise agreements were terminated in 2018 due to material defaults in those agreements, as determined by the Company. The former franchisee filed a demand for arbitration against the Company in October 2022, after the Company prevailed in a prior arbitration in 2018. The Company was awarded approximately $758,000, plus accrued interest, in that proceeding, which to this date, has not been collected. The company is being accused of breaching its franchise agreement, among other related matters. The parties have completed discovery on the first phase, and a hearing is set for April 2024. In the event any claims remain after the hearing and award in the first phase of the arbitration, the parties will set a schedule for the second phase of the arbitration, in which the issues of whether there is any liability and damages will be resolved. The company intends to vigorously defend itself in the arbitration and it is believed that the majority, if not all, of
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to the 2024 FDD, Golden Krust Caribbean Restaurant is currently involved in a lawsuit with a former franchisee whose agreements were terminated in 2018 due to material defaults. The former franchisee filed for arbitration in October 2022, after Golden Krust Caribbean Restaurant prevailed in a prior arbitration in 2018 and was awarded approximately $758,000 plus accrued interest, which has not yet been collected. The former franchisee is accusing Golden Krust Caribbean Restaurant of breaching its franchise agreement.
Following the first phase of arbitration, a second phase will be scheduled if any claims remain. During this second phase, the key issues to be resolved are whether Golden Krust Caribbean Restaurant has any liability to the former franchisee and, if so, the amount of damages that Golden Krust Caribbean Restaurant would be required to pay.
Golden Krust Caribbean Restaurant intends to defend itself vigorously in the arbitration, believing that most, if not all, of the claims will be dismissed after the first phase. However, the FDD states that the amount of a potential unfavorable outcome cannot be reasonably estimated at this stage. This arbitration and its potential outcome represent a risk factor for prospective franchisees, as an unfavorable ruling could impact the financial stability of the franchisor.