What happens if an Itan franchisee's lease is terminated due to their default?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Right to Cure. If Tenant defaults under the Lease, Franchisor has the right (but not the duty) to cure such default within 15 days following the expiration of any applicable cure period. In such event, Franchisor may immediately commence occupancy of the Premises as the tenant under the Lease without obtaining Landlord's or Tenant's consent. Franchisor may thereafter assign the Lease to another iTAN franchisee or to an entity owned and/or controlled by Franchisor. If it does, Franchisor must first obtain Landlord's written approval of the assignee. Landlord, however, must neither unreasonably withhold nor delay its approval thereof. Landlord will acknowledge any such assignment in writing. No assignment permitted under this Section is subject to any assignment or similar fee or will cause any rental acceleration.
| h. "Cause" defined - non-curable defaults | FA: 20.2 | The following defaults cannot be cured: insolvency, bankruptcy or seizure of assets; failure to successfully complete training; failure to find approved site, secure lease or open in timely manner; abandonment; failure to maintain required license or permit; conviction of certain crimes or subject of certain administrative actions; violation of material law; commission of act that may adversely affect reputation of System or Marks; health or safety hazards; material misrepresentations; 2 nd underreporting of amounts due by at least 3%; unauthorized Transfers; unauthorized use of our intellectual property; violation of brand protection covenant; breach of Franchise Owner Agreement; breach of legal compliance representations; failure to notify us of a matter described in §15.6; termination of lease due to your default; 3 or more default notices in a 12-month period; or termination of any other agreement between you (or your affiliate) and us (or our affiliate) due to your default. However, termination of an ADA due to breach of the development schedule is not grounds for termination of any Franchise Agreement that is otherwise in good standing.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 36–39)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, if a franchisee's lease is terminated due to their default, Itan has the right, but not the duty, to cure the default within 15 days following the expiration of any applicable cure period. If Itan chooses to cure the default, it may immediately take occupancy of the premises without needing consent from the landlord or the original franchisee.
After taking occupancy, Itan can assign the lease to another Itan franchisee or an entity owned or controlled by Itan. However, Itan must first obtain the landlord's written approval for the assignment, which the landlord cannot unreasonably withhold or delay. The landlord must acknowledge the assignment in writing, and no assignment or similar fee will be applied, nor will it cause any rental acceleration.
Furthermore, the FDD states that the termination of the lease due to the franchisee's default is considered a non-curable default under the Franchise Agreement. This means that the franchisee does not have an opportunity to correct the default and prevent termination of the franchise agreement. This situation highlights the importance of franchisees maintaining good standing with their lease obligations to avoid potential franchise termination and the loss of their business.