Under what circumstances does 360 Painting have a right of first refusal to acquire my 360 Painting business?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Franchise Agreement | Summary you agree to mediate any dispute, controversy or claim before | |
|---|---|---|---|
| bringing suit. | |||
| v. | Choi ce of forum | Section 27.2 | Subject to applicable state law, any mediation or litigation must be pursued in courts located in the county and state in which we maintain our principal place of business (currently the City of Charlottesville, VA). |
| w. | Choi ce of law | Section 27.1 | Subject to applicable state law, Virginia law applies, except disputes over the Marks will be governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sec. 1051 et seq.). |
| Provision | Section in Franchise Agreement | Summary financial report or other data that underestimates fees; multiple defaults within a twelve month period; material default under any other agreement you have with us; or 3 or more failed payments within any 12 month period. | |
| i. | Franchisee's obligations on termination or non renewal | Section 20; Internet Web Sites and Listings Agreement; Telephone Listing Agreement | You must: return all Confidential Information; stop using the System and the Marks and refrain from doing business under a confusing name or manner; pay all sums owed to us; de identify the Vehicles and the Business; cancel or assign to us any assumed names; assign your telephone and facsimile numbers to us; fulfill warranties obligations and either (i) post a bond equal to 0.5% of your gross sales for the last 24 months, or (ii) pay us a fee; comply with the covenants not to compete and any other surviving provisions of the Franchise Agreement. |
| j. | Assignment of contract by franchisor | Section 17.1 | There are no restrictions on our right to assign our interest in the Franchise Agreement |
| k. | "Transfer" by franchisee – definition | Section 17.2 | "Transfer" includes transfer of ownership or any interest in the Business, the Franchise Agreement, the Vehicle(s), the Business's assets or the franchisee entity or its owners if an entity. |
| l. | Franchisor approval of transfer by franchisee | Sections 17.2 and 17.4 | You may not transfer without our prior written consent. |
| m. | Conditions for franchisor approval of transfer | Section 17.4 | You may transfer if you: have paid all monetary obligations; are not in default; sign a general release (subject to state law); pay to us a transfer fee; offer us, and we decline to exercise, a right of first refusal; provide us with copies of all transfer documents and the terms and conditions will not affect adversely the operation of the Business by transferee; subordinate debt; remain liable for all warranties. The transferee must: meet our standards; be bound jointly and severally or execute our then current form of franchise agreement; obtain all necessary consents and approvals; comply with applicable laws; if we request, refurbish the Vehicles or purchase additional Vehicles. |
| n. | Franchisor's right of first refusal to acquire franchisee's business | Section 17.8 | We have a right of first refusal if you or your equity holders desire to sell 15% or more of the assets of the Franchised Business; or any ownership interest in the Franchise Agreement or any franchisee business entity. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 42–46)
What This Means (2025 FDD)
According to 360 Painting's 2025 Franchise Disclosure Document, 360 Painting has a right of first refusal if a franchisee or their equity holders desire to sell 15% or more of the assets of the franchised business. This also applies to any ownership interest in the Franchise Agreement or any franchisee business entity.
This right of first refusal means that before a 360 Painting franchisee can sell a significant portion of their business or ownership, they must first offer 360 Painting the opportunity to purchase it on the same terms and conditions as the proposed sale. This allows 360 Painting to maintain control over who enters the franchise system and to potentially consolidate successful operations.
If a franchisee proceeds with a sale without first offering 360 Painting the right of first refusal, it could be considered a breach of the Franchise Agreement, potentially leading to legal consequences or termination of the franchise. It is important for prospective franchisees to understand this clause and factor it into their long-term business plans and exit strategies.
Right of first refusal is a fairly common clause in franchise agreements. It protects the franchisor's brand and business model by giving them control over who becomes a franchisee. Franchisees should carefully consider this when planning for the future sale or transfer of their 360 Painting franchise.