What are the consequences if a Lees Famous Recipe franchisee fails to comply with the Development Schedule?

According to the 2025 FDD, if a Lees Famous Recipe franchisee fails to comply with the Development Schedule, the company may take certain actions. Lees Famous Recipe can terminate or modify the franchisee's territorial rights in the Development Area. They can also reduce or modify the size of the Development Area, or reduce the number of restaurants the franchisee is granted the right to develop under the agreement. These actions are in addition to any other remedies available to Lees Famous Recipe under the agreement, franchise agreements, and applicable law.

This means that a franchisee who does not meet the agreed-upon timeline for opening new Lees Famous Recipe restaurants risks losing their exclusive territory. Lees Famous Recipe could shrink the area where the franchisee is allowed to develop restaurants, or decrease the total number of restaurants the franchisee is authorized to open. This could significantly impact the franchisee's potential revenue and return on investment, as it limits their ability to expand and capitalize on the market within the originally agreed-upon territory.

Furthermore, the FDD states that Lees Famous Recipe can terminate the Area Development Agreement if the franchisee fails to meet their development obligations for any single Development Period and fails to cure the default within thirty days of receiving notice. Upon termination or expiration of the agreement, the franchisee must immediately cease developing new restaurants in the Development Area, and Lees Famous Recipe is entitled to grant others the right to establish and operate Lees Famous Recipe restaurants in the area. This underscores the importance of adhering to the Development Schedule and the potential for significant financial repercussions if the franchisee fails to do so.

Prospective franchisees should carefully review the Development Schedule and assess their ability to meet the required timelines before entering into an Area Development Agreement with Lees Famous Recipe. It is crucial to have a solid business plan and sufficient capital to ensure compliance with the development obligations and avoid the potential loss of territorial rights and termination of the agreement.