Sample Franchise Disclosure Document – Item 17: The Franchise Relationship Example

October 11, 2011


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.

Notes:

(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.

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