What consents and approvals must a transferee obtain for a 360 Painting franchise transfer?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
Agreement, nothing in this Agreement shall be deemed to require Franchisor to remain in the business of 360 Painting or to offer or sell any products or services to Franchisee. In the event of a sale, transfer or assignment by Franchisor of this Agreement or any interest therein, such transfer or assignment will constitute a novation as to Franchisor, and Franchisor shall thereupon and without further agreement, be freed and relieved of all liability with respect to such covenants and obligations. The consent of Franchisee to such sale, transfer or assignment shall not be required and, notwithstanding any such sale, transfer or assignment, Franchisee shall continue to be fully bound by its obligations under this Agreement.
17.2 Assignment by Franchisee. Franchisee shall not subfranchise, sell, assign, transfer, merge, convey or encumber, in whole or in part (each, a "Transfer"), the Business, the Vehicles, this Agreement or any of its rights or obligations hereunder, or suffer or permit any such Transfer of the Business, the Vehicles, this Agreement or its rights or obligations hereunder to occur by operation of law or otherwise without the prior express written consent of Franchisor. In addition, if Franchisee is a corporation, limited liability company, partnership, business trust, or similar association or entity, the shareholders, members, partners, beneficiaries, investors or other equity holders, as the case may be, may not Transfer their equity interests in such corporation, limited liability company, partnership, business trust, or similar association or entity, without the prior written consent of Franchisor. Furthermore, in the event that any shareholder, member, partner, investor or other direct or indirect equity holder of Franchisee (the "Equity Holder") is a corporation, limited liability company, partnership, business trust, or similar association or entity, the interests of the shareholders, members, partners, beneficiaries, investors or other equity holders, as the case may be, in such Equity Holder, may not be Transferred, without the prior written consent of Franchisor. Any Transfer in violation of this Section shall be void and of no force and effect, will be ineffective against Franchisor and will constitute a material default hereunder. If Franchisee or an Equity Holder is a corporation, limited liability company, partnership, business trust, or similar association or entity with certificated equity interests, all stock or equity certificates of Franchisee or Equity Holder shall have conspicuously endorsed upon them a legend in substantially the following form:
"A transfer of this stock is subject to the terms and conditions of a 360 Painting, LLC FRANCHISE AGREEMENT dated the day of," Franchisor's consent to a Transfer of any interest in this Agreement, or of any direct or indirect ownership interest in the Franchisee, an Equity Holder or any owner thereof, shall not constitute a waiver of any claims Franchisor may have against Franchisee, the transferor or the transferee, nor shall it be deemed a waiver of Franchisor's right to demand compliance with the terms of this Agreement.
17.3 Death or Disability of Franchisee. Upon the death or incapacity of any person with an interest in this Agreement, in Franchisee, in the Franchised Business, or in all or substantially all of the assets of the Franchised Business, the executor, administrator, or personal representative of such person must transfer such interest to a third party approved by Franchisor within 6 months after such death or incapacity. Such transfers, including, without limitation, transfers by devise or inheritance, will be subject to the same conditions as any inter vivos transfer. In the case of transfer by devise or inheritance, if the heirs
or beneficiaries of any such person are unable to meet the conditions in this Section 17, the executor, administrator, or personal representative of the decedent will transfer the decedent's interest to another party approved by us within a reasonable time, which disposition will be subject to all the terms and conditions for transfers contained in this Agreement. If the interest is not disposed of within a reasonable time, we may terminate this Agreement, pursuant to Section 19.2(xiv). Any transfer subject to this section which is made in accordance with a succession plan approved in advance by Franchisor will be deemed approved for the purposes of this Section 17.3. Franchisor shall not unreasonably withhold its consent to the Transfer of this Agreement or any ownership interest to the deceased or disabled Franchisee's or Equity Holder's spouse, heirs or members of his or her immediate family, provided all requirements of Section 17.4 have been complied with (except payment of the transfer fee, which shall not apply to such Transfers).
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to the 2025 360 Painting Franchise Disclosure Document, a franchisee needs prior express written consent from 360 Painting to transfer the business. This includes selling, assigning, or transferring the Franchise Agreement or any rights or obligations under it. This requirement extends to transfers occurring by law or otherwise. If the franchisee is a corporation, LLC, partnership, or similar entity, the equity holders cannot transfer their interests without the franchisor's prior written consent. This condition applies even to equity holders that are themselves corporations or similar entities. Any transfer that violates these conditions is considered void and a material default of the agreement.
To ensure compliance, 360 Painting requires that all stock or equity certificates of the franchisee or equity holder bear a specific legend indicating that the stock transfer is subject to the terms of the Franchise Agreement. This measure is designed to provide notice to potential transferees about the transfer restrictions. The franchisor's consent to a transfer does not waive any claims it may have against the franchisee, transferor, or transferee, nor does it waive the right to demand compliance with the terms of the agreement.
360 Painting retains the right to investigate any potential transferee's qualifications and assess the proposed purchase terms. This allows 360 Painting to protect its business interests by withholding consent from transactions it deems economically questionable. The franchisee also waives any claim that the franchisor's actions to protect its business interests constitute tortious interference. Furthermore, 360 Painting can make its records relating to the agreement available for inspection by any intended transferee, with the franchisee's consent and a release holding the franchisor harmless from any claims resulting from such inspection.
If a franchisee or equity holder proposes a transfer that involves selling 15% or more of the franchised business's assets or any ownership interest in the agreement or franchisee entity, the franchisee must first obtain a bona fide, executed written offer and deliver it to 360 Painting. 360 Painting then has 30 days to exercise its right of first refusal to purchase the assets or ownership interests on the same terms and conditions as the offer. 360 Painting can substitute cash for the fair market value of any form of payment proposed in the offer.