What happens if a Spray Net franchisee commits fraud or misrepresentation in the establishment or operation of the franchised business?

According to Spray Net's 2025 Franchise Disclosure Document, if a franchisee engages in fraud, the franchisor retains all available remedies against the franchisee. Specifically, in the event of early termination of the franchise agreement, the franchisee is obligated to pay liquidated damages. These damages are calculated as seven percent of the applicable annual Minimum Gross Sales for the Spray Net business, as detailed in Section 6.Z of the agreement, corresponding to the year in which the agreement is terminated. The calculation of annual Minimum Gross Sales is based on the number of territories the franchisee has purchased and the duration the franchisee has operated the franchised business.

These liquidated damages are in addition to any other legal remedies Spray Net may pursue against the franchisee. This includes claims related to breaches of restrictive covenants outlined in Section 14 of the agreement, as well as extracontractual claims such as fraud or unfair and deceptive trade practices. This means that in addition to the liquidated damages, Spray Net can also pursue separate legal actions to seek compensation for damages resulting from the franchisee's fraudulent activities or other misconduct.

This provision ensures that Spray Net is not limited to only the liquidated damages in cases of serious franchisee misconduct. It allows Spray Net to pursue full legal recourse to protect its brand, system, and other franchisees from the harm caused by a franchisee's fraudulent or deceptive actions. Prospective franchisees should be aware that engaging in fraudulent activities can lead to significant financial penalties and legal consequences beyond the standard liquidated damages for early termination.