When does an unpaid trade debt constitute a material breach of the Itan Franchise Agreement?

According to Itan's 2025 Franchise Disclosure Document, a trade debt that remains unpaid for more than 30 days after its due date constitutes a material breach of the Franchise Agreement. However, there are two exceptions to this rule.

First, if the franchisee and the supplier agree to alternative payment terms before the end of the 30-day period, the debt will not be considered a material breach. This provides an opportunity for franchisees to negotiate payment plans with suppliers if they are facing temporary financial difficulties. Second, if the franchisee initiates appropriate legal action to contest the trade debt before the end of the 30-day period, the debt will also not be considered a material breach. This allows franchisees to dispute charges they believe are incorrect or unjustified without automatically being in breach of the agreement.

It is important for prospective Itan franchisees to understand these conditions, as a material breach of the Franchise Agreement can have serious consequences, potentially leading to termination of the franchise. Franchisees should maintain open communication with suppliers and promptly address any payment disputes to avoid breaching the agreement. This clause aims to protect the relationship between Itan and its suppliers, as the failure of a franchisee to pay a system supplier can jeopardize the supplier's relationship with Itan and other franchisees.