What constitutes 'cause' for termination of a Lees Famous Recipe franchise agreement?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in franchise agreement | Summary | |
|---|---|---|---|
| a. | Length of the franchise term | 3 | Term is 15 years. |
| b. | Renewal or extension of the term | 3 | If you are in good standing, you may renew for an additional 15-year term. |
| Provision | Section in franchise agreement | Summary | |
| ---- | --------------------------------------------------- | -------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| c. | Requirements for franchisee to renew or extend | 3 | Provide advance notice, not be in default within the 24 months preceding the expiration of the initial term, comply with current Franchise Agreement, satisfactorily complete any new/refresher training programs, sign a new agreement (which may contain materially different terms and conditions than your original Franchise Agreement), remodel, provide proof you will maintain possession of the Restaurant premises and remodel the Restaurant as necessary to comply with our then-current standards and specifications, pay a renewal fee, and sign a general release of claims. |
| d. | Termination by franchisee | None | Not applicable. |
| e. | Termination by franchisor without cause | None | Not applicable. |
| f. | Termination by franchisor with | 15(A) through | We may terminate the Franchise Agreement only if |
| cause | (C) | you default. | |
| g. | "Cause" defined – curable defaults | 15(C) | Failure to conform to the material requirements of the System or the material standards as described in the Operations Manual or as we have established under the System; failure to timely pay any obligations or liabilities due and owing to us or our affiliates; violation of any material provision or obligation of the Franchise Agreement; and other breaches The cure period is generally 30 days |
| h. | "Cause" defined – non-curable defaults | 15(A) through (B) | Non-curable defaults include: Insolvency; bankruptcy, assignment for the benefit of creditors; receivership, attachment not released in 30 days; termination of right to occupy the premises; failure to commence operations on time; conviction of felony or similar event; violation of the non-competition or nondisclosure covenants; repeated defaults (3 in 12 months, even if cured); failure to correct legal or regulatory compliance 30 days after notice from authority; submission of false information, failure to allow inspection; if the continued operation of your Restaurant will result in danger to public health or safety; abandonment; unapproved transfers or assignments; failure to maintain ACH capability; failure to restore operations within 365 days after loss of possession by either condemnation or casualty; if during the Term no Guarantor satisfies the Guarantor Net Worth requirement. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 54–59)
What This Means (2025 FDD)
According to Lees Famous Recipe's 2025 Franchise Disclosure Document, the franchise agreement can be terminated by the franchisor if the franchisee defaults. Defaults are divided into two categories: curable and non-curable. Curable defaults include failure to conform to the material requirements of the System or the material standards as described in the Operations Manual, failure to timely pay any obligations or liabilities due to Lees Famous Recipe or its affiliates, and violation of any material provision or obligation of the Franchise Agreement. The franchisee generally has 30 days to cure these defaults.
Non-curable defaults, which allow for immediate termination, include insolvency, bankruptcy, assignment for the benefit of creditors, receivership, attachment not released in 30 days, termination of the right to occupy the premises, and failure to commence operations on time. Further non-curable defaults include conviction of a felony or similar event, violation of the non-competition or nondisclosure covenants, repeated defaults (3 in 12 months, even if cured), failure to correct legal or regulatory compliance 30 days after notice from authority, submission of false information, failure to allow inspection, and if the continued operation of your Restaurant will result in danger to public health or safety. Additional non-curable defaults include abandonment, unapproved transfers or assignments, failure to maintain ACH capability, failure to restore operations within 365 days after loss of possession by either condemnation or casualty, and if during the Term no Guarantor satisfies the Guarantor Net Worth requirement.
For prospective Lees Famous Recipe franchisees, understanding these termination conditions is crucial. It highlights the importance of adhering to the brand's operational standards, maintaining financial stability, and complying with legal and contractual obligations. The distinction between curable and non-curable defaults is also significant, as it dictates the franchisee's opportunity to rectify the situation and avoid termination. Franchisees should pay close attention to the specific requirements outlined in the Operations Manual and Franchise Agreement to minimize the risk of default and potential termination.