What is the purpose of the noncompliance fees collected by Itan?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
Salon receives a "grade" or "score" based on the inspection results. Failure to achieve a passing grade or score constitutes a default under this Agreement. You must implement all corrective measures we require within the time period we specify to rectify any noncompliance issues revealed by an inspection.
- 11.16.Failure to Comply with Standards. You acknowledge the importance of every one of our standards and operating procedures to the reputation and integrity of the System and goodwill associated with the Marks. If we notify you of a breach of our standards or operating procedures (including failure to submit required reports in a timely manner) and you fail to cure within the time period we prescribe, we may (in addition to our other remedies under this Agreement) impose a noncompliance fee of $500 per occurrence. We may impose a separate $500 fee every 48 hours the same noncompliance issue remains uncured after we impose the initial fee. Any noncompliance fees we collect are paid in consideration of us refraining from exercising our contractual right to terminate this Agreement. If you fail to cure a breach before the expiration of the cure period (if any) and we take steps to cure the breach (for example, obtaining required insurance coverage on your behalf or paying amounts you owe to system suppliers), then you must reimburse
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, the noncompliance fees are imposed when a franchisee fails to adhere to Itan's standards and operating procedures. If Itan notifies a franchisee of a breach, such as failing to submit required reports on time, and the franchisee does not correct the issue within the given timeframe, Itan may charge a noncompliance fee of $500 per occurrence.
Furthermore, Itan can impose an additional $500 fee every 48 hours if the noncompliance issue remains unresolved after the initial fee. These fees are collected in exchange for Itan refraining from terminating the Franchise Agreement, which they would otherwise be contractually entitled to do. However, the payment of these fees does not prevent Itan from terminating the agreement if the breach continues even after the fees are collected.
In addition to noncompliance fees, if Itan takes steps to correct the breach themselves, such as obtaining required insurance or paying amounts owed to system suppliers, the franchisee must reimburse Itan for all associated costs and expenses. This means that franchisees need to be diligent in adhering to Itan's standards and procedures to avoid these fees and potential further action from the franchisor.