What constitutes 'good cause' for Itan to terminate the agreement?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
20.1. By You**. You may terminate this Agreement if we fail to cure a material breach within 90 days after you send us a default notice specifying the nature of the breach. If you terminate pursuant to §20.1, you must still comply with your post-term obligations described in §21 (other than payment of liquidated damages) and all other obligations that survive the termination of this Agreement.
20.2. By Us. We may terminate this Agreement, effective upon delivery of a notice of termination, for any of the following reasons, all of which constitute material events of default and "good cause" for termination, and without opportunity to cure except for any cure period expressly set forth below:
- (a) if you are insolvent due to your inability to pay your debts as they become due;
- (b) if you file a voluntary petition in bankruptcy or any pleading seeking any reorganization, liquidation, dissolution or composition or other settlement with creditors under any Law, or you are the subject of an involuntary bankruptcy (which may or may not be enforceable under the Bankruptcy Act of 1978);
- (c) if your Salon, or substantially all of its assets, are seized by a Government Official or taken over or foreclosed upon by a creditor, lienholder or lessor;
- (d) if a final judgment against you remains unsatisfied for 30 days unless a supersedes or other appeal bond has been filed;
- (e) if a levy of execution has been made upon the license granted by this Agreement or any property used in your Business and is not discharged within five (5) days of the levy;
- (f) if the Managing Owner fails to satisfactorily complete initial training as required by §5.1;
- (g) if you fail to identify an approved site, secure a fully executed lease and Lease Addendum or open your Salon before the associated deadlines set forth in §7.1, §7.2 or §7.4, respectively;
(h) if you abandon or fail to operate your Salon for three (3) consecutive business days unless due to Force Majeure (in which case §24.6 governs) or another reason we approve;
(i) if a Governmental Authority suspends or revokes a license or permit held by you or an Owner that is required to operate the Salon even if you or the Owner have appeal rights;
(j) if you operate the Salon in a manner that presents a health or safety hazard to your customers, employees or the public;
(k) if you underreport Gross Sales by at least 3% on two (2) or more occasions;
(l) if you fail to pay any amount owed to us, our affiliate or an approved or designated supplier within 10 days after demand for payment (subject to your right to dispute, in good faith, amounts owed to third-party suppliers in accordance with §11.7(d));
(m) if you fail to timely notify us of a Reportable Event in accordance with §15.6;
(n) if you (or an Owner) (i) are subject to a material administrative disciplinary action or (ii) plead no contest to, or are convicted of, a felony or other material crime;
(o) if you (or an Owner) fail to comply with a material Law applicable to your Salon;
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, 'good cause' for Itan to terminate the franchise agreement includes several specific events of default. These include insolvency, filing for bankruptcy or similar reorganization, seizure of the salon's assets, an unsatisfied final judgment against the franchisee for 30 days, or a levy of execution on the franchise license or business property that isn't discharged within five days. Additionally, failure of the Managing Owner to complete initial training satisfactorily, failure to secure an approved site and lease or open the salon by specified deadlines, or abandoning the salon for three consecutive business days (unless due to Force Majeure or approved reasons) also constitute 'good cause'.
Itan can terminate the agreement if the franchisee breaches any provision of the agreement and fails to cure the breach within 30 days after receiving a default notice. This means a franchisee has a limited time frame to correct any issues after being notified by Itan. The FDD specifies that termination is effective upon delivery of a termination notice, emphasizing the importance of addressing default notices promptly to avoid termination.
Furthermore, 'good cause' extends to situations involving the transfer of ownership. Itan can refuse a transfer if the proposed transferee doesn't meet Itan's current qualifications or standards, is a competitor of Itan, is unwilling to comply with all lawful obligations, or if the franchisee or proposed transferee owes sums to Itan or has uncured defaults at the time of the proposed transfer. This protects Itan's brand and standards by ensuring any new owners meet their criteria and obligations.
These termination clauses are typical in franchise agreements, as they protect the franchisor's brand and system standards. Prospective Itan franchisees should carefully review these conditions to understand their obligations and the circumstances under which their franchise agreement could be terminated. Understanding these conditions is crucial for maintaining a successful and compliant franchise operation.