Under what conditions can Itan impose a noncompliance fee?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
hin 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, Itan can impose a noncompliance fee of $500 per occurrence if a franchisee fails to comply with the brand's standards and operating procedures. This includes failing to submit required reports in a timely manner.
The process begins with Itan notifying the franchisee of the breach. The franchisee then has a prescribed time period to correct the issue. If the franchisee fails to cure the breach within this time, Itan can impose the $500 fee. Furthermore, Itan can impose an additional $500 fee every 48 hours if the same noncompliance issue remains unresolved after the initial fee is applied.
Itan states that these noncompliance fees are collected in consideration of Itan refraining from terminating the Franchise Agreement. However, the payment of these fees does not prevent Itan from terminating the agreement if the breach continues even after the fees are collected. Additionally, if Itan takes steps to correct the breach themselves, the franchisee must reimburse Itan for all associated costs and expenses.