What happens if a Monicals Pizza franchisee defaults on the lease for their approved location?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
effect. Any default for which the lease may be terminated shall also be deemed a default hereunder, and the time to cure the same hereunder shall expire when the lease is terminated. Franchisor has the right to require that the lease for the Approved Location be collaterally assigned by Franchisee to Franchisor, pursuant to the terms of its standard collateral assignment of lease form, to secure performance by Franchisee of its obligation under this Agreement. Franchisor's approval of a lease shall be conditioned upon inclusion of terms in the lease acceptable to Franchisor and the lease shall contain a "Lease Addendum" in the form of Exhibit 4, fully executed by Franchisee and the lessor of the Approved Location.
5.4 Development of Approved Location
Franchisor shall make available to Franchisee, at no charge to Franchisee, specifications for the development of a Monical's Restaurant, including specifications for the exterior and interior design and layout, fixtures, equipment, décor and signs. Such specifications are subject to alteration as Franchisor deems necessary. Franchisee shall cause the Approved Location to be developed, equipped and improved in accordance with such plans and specifications and shall begin operating the Franchised Restaurant within three hundred sixty-five (365) days after the Effective Date. In connection with the development of the Approved Location, Franchisee shall:
- 5.4.1 employ an approved competent licensed architect and engineer to prepare, for Franchisor's approval, preliminary specifications for improvement of the Approved Location adapted from the specifications furnished by Franchisor;
- 5.4.2 obtain all zoning approvals, permits and clearances which may be required by state and local laws, ordinances or regulations, and submit to Franchisor, for Franchisor's approval, final plans for construction based upon the preliminary specifications;
- 5.4.3 obtain all building, utility, sign, health, and business permits and licenses, and any other permits and licenses required for the development and operation of the Franchised Restaurant and certify in writing and provide evidence to Franchisor that all such permits and certifications have been obtained;
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, if a franchisee defaults on their lease, it is considered a default of the Franchise Agreement. The time to cure the lease default also applies to curing the Franchise Agreement default. Monicals Pizza has the right to require that the lease for the approved location be collaterally assigned by the franchisee to Monicals Pizza, securing the franchisee's obligations under the Franchise Agreement.
Furthermore, the landlord is obligated to provide Monicals Pizza with any written notice of default simultaneously with delivery to the franchisee. Monicals Pizza then has fifteen days after the period given to the tenant to cure any deficiency under the lease, should the franchisee fail to do so, although Monicals Pizza is not obligated to do so. The landlord must also provide Monicals Pizza with copies of all proposed lease amendments, assignments, related documents, letters, and notices sent to the franchisee regarding the lease or premises.
Upon termination or expiration of the Franchise Agreement, the franchisee must assign their interest in any lease for the approved location to Monicals Pizza, or sublease if an assignment is prohibited and Monicals Pizza approved the lease. The franchisee must provide evidence of compliance within thirty days after termination or expiration. Monicals Pizza also has the right to pay rent and other expenses directly to the party to whom payment is ultimately due.
These stipulations protect Monicals Pizza's interest in maintaining the location and brand presence, even if a franchisee fails to meet their lease obligations. This is a fairly common practice in franchising, as it allows the franchisor to potentially continue operations at a location with a new franchisee, mitigating losses and maintaining brand recognition.