ITEM 17: THE FRANCHISE RELATIONSHIP
This table lists certain important provisions of the franchise and related agreements. You should read these provisions in the agreements attached to this disclosure document.
Provision Section in franchise or other agreement Summary a. Length of the franchise term Section 1 (also Section 1 of Lease) Term is equal to lease term (10 years). (Exhibits A and B). b. Renewal or extension Section 20 If you are in good standing, upon expiration of your original franchise agreement, you will have the right to renew your franchise for another 10-year term by signing the then current franchise agreement. This means that you may be asked to sign an agreement with terms and conditions that are materially different from those in your original agreement. c. Requirement for franchisee to renew or extend Section 20 Sign then-current franchise agreement, pay renewal fee, remodel, and sign or extend lease. d. Termination by franchisee None e. Termination by franchisor without cause None f. Termination by franchisor with cause Section 21 Belmont can terminate only if you default. g. “Cause” defined – curable defaults Section 21B You have 30 days to cure: non-payment of fees, sanitation problems, non-submission of reports, and any other default not listed in Section 21A. h. “Cause” defined – noncurable defaults Section 22 Non-curable defaults: conviction of felony, repeated defaults even if cured, abandonment, trademark misuse, and unapproved transfers. i. Franchisee’s obligations on termination/non-renewal Section 22 Obligations include complete de-identification and payment of amounts due (also see r. below). j. Assignment of contract by franchisor Section 18 No restriction on Belmont’s right to assign. k. “Transfer” by franchiseedefined Section 19A Includes transfer of contract or assets or ownership change. l. Franchisor approval of transfer by franchisee Section 19B Belmont has the right to approve all transfers but will not unreasonably withhold approval. m. Conditions for franchisor approval of transfer Section 19C New franchisee qualifies, transfer fee is paid, purchaser transfer agreement approved, training arranged, release signed by you, and current agreement signed by new franchisee (also see r, below). n. Franchisor’s right of first refusal to acquire franchisee’s business Section 19F Belmont can match any offer for the franchisee’s business. o. Franchisor’s option to purchase franchisee’s business None, but see policy described in Note 1 p. Death or disability of franchisee Section 19D Franchise must be assigned by estate to approved buyer within 6 months. q. Non-competition covenants during the term of the franchise. Section 11 No involvement in competing business anywhere in the U.S. r. Non-competition covenants after the franchise is terminated or expires Section 19C and 22C No competing business for 2 years within 20 miles of another Belmont franchise (including after assignment). s. Modification of agreement Section 8A No modifications generally, but Operating Manual is subject to change. t. Integration/merger clause Section 29 Only the terms of the franchise agreement are binding (subject to state law). Any representations or promises outside of the disclosure document and franchise agreement may not be enforceable. u. Dispute resolution by arbitration or mediation Section 29 Except for certain claims, all disputes must be arbitrated in Minnesota. v. Choice of forum Section 27 Litigation must be in Minnesota. w. Choice of law Section 28 Minnesota law applies.
(1) Franchisor is not obligated by the Agreement to do so, but, if the franchise is terminated, franchisor’s policy is to buy back inventory at fair market value. This policy is subject to change at any time.
This article is part of a series of articles on starting a franchise in Minnesota.
The content of this post has been copied from the Federal Trade Commission’s Franchise Rule 16 C.F.R. Part 436 Compliance Guide