Under what circumstances can Lees Famous Recipe terminate the Franchise Agreement with cause?
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, Lees Famous Recipe can terminate the Franchise Agreement with cause if the franchisee defaults. The FDD outlines both curable and non-curable defaults that can lead to termination.
Curable defaults include failure to conform to the material requirements of the System or the material standards, failure to timely pay any obligations, or violation of any material provision of the Franchise Agreement. Generally, the franchisee has 30 days to cure these defaults. Non-curable defaults include events such as insolvency, bankruptcy, assignment for the benefit of creditors, termination of the right to occupy the premises, failure to commence operations on time, conviction of a felony, violation of 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.
These termination clauses are standard in franchise agreements to protect the brand and ensure franchisees adhere to the operational and financial standards. Prospective Lees Famous Recipe franchisees should carefully review Section 15(A) through (C) of the Franchise Agreement, as well as Section 8(B) of the Area Development Agreement, to fully understand what constitutes a default and the potential consequences. Understanding these conditions is crucial for maintaining a successful and compliant franchise operation with Lees Famous Recipe.