What constitutes 'good cause' for Zoomin Groomin to repurchase a franchisee's business?
Zoomin_Groomin Franchise · 2025 FDDAnswer from 2025 FDD Document
Except as otherwise provided by this chapter, no franchisor may terminate a franchise prior to the expiration of its term, except for good cause. Except as provided in Section 20021, good cause shall be limited to the failure of the franchisee to substantially comply with the lawful requirements imposed upon the franchisee by the franchise agreement after being given notice at least 60 days in advance of the termination and a reasonable opportunity, which in no event shall be less than 60 days from the date of the notice of noncompliance, to cure the failure. The period to exercise the right to cure shall not exceed 75 days unless there is a separate agreement between the franchisor and franchisee to extend the time.
CA Bus & Prof Code Section 20021
If during the period in which the franchise is in effect, there occurs any of the following events which is relevant to the franchise, immediate notice of termination without an opportunity to cure, shall be deemed reasonable:
(a) The franchisee or the business to which the franchise relates has been the subject of an order for relief in bankruptcy, judicially determined to be insolvent, all or a substantial part of the assets thereof are assigned to or for the benefit of any creditor, or the franchisee admits his or her inability to pay his or her debts as they come due;
(b) The franchisee abandons the franchise by failing to operate the business for five consecutive days during which the franchisee is required to operate the business under the terms of the franchise, or any shorter period after which it is not unreasonable under the facts and circumstances for the franchisor to conclude that the franchisee does not intend to continue to operate the franchise, unless such failure to operate is due to fire, flood, earthquake, or other similar causes beyond the franchisee's control;
(c) The franchisor and franchisee agree in writing to terminate the franchise;
(d) The franchisee makes any material misrepresentations relating to the acquisition of the franchise business or the franchisee engages in conduct which reflects materially and unfavorably upon the operation and reputation of the franchise business or system;
Source: Item 9 — 01. Financial Statements and Exhibits. (FDD pages 68–156)
What This Means (2025 FDD)
According to the 2025 Zoomin Groomin Franchise Disclosure Document, 'good cause' for termination of a franchise prior to its expiration is generally limited to the franchisee's failure to substantially comply with the lawful requirements of the franchise agreement. In such cases, Zoomin Groomin must provide the franchisee with at least 60 days' advance notice of termination and a reasonable opportunity to cure the failure, which should not be less than 60 days from the date of the notice. The period to cure cannot exceed 75 days unless both parties agree to extend the time. This aligns with standard franchise practices that prioritize giving franchisees a chance to correct any deficiencies before termination.
However, the Zoomin Groomin franchise agreement also stipulates certain events that allow for immediate termination without an opportunity to cure. These include situations where the franchisee or the business becomes subject to bankruptcy proceedings, is judicially determined to be insolvent, assigns assets for the benefit of creditors, or admits inability to pay debts. Immediate termination is also permissible if the franchisee abandons the franchise by failing to operate the business for five consecutive days (or a shorter period under circumstances indicating an intent to discontinue operation), unless the failure is due to events beyond the franchisee's control like natural disasters.
Additionally, Zoomin Groomin can immediately terminate the franchise if the franchisor and franchisee agree in writing to terminate the franchise, or if the franchisee makes any material misrepresentations relating to the acquisition of the franchise business or engages in conduct that materially and unfavorably reflects upon the operation and reputation of the franchise business or system. These stipulations are fairly standard in franchising, as they protect the franchisor's brand and system integrity while also addressing severe financial or operational failures on the part of the franchisee. A prospective franchisee should carefully review these conditions to understand the circumstances under which their franchise could be terminated without an opportunity to cure.