What information about financing sources and terms must be included in the offer submitted to 7 Brew?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
- j. we have determined that the purchase price, payment terms, and required financing will not adversely affect the transferee's operation of the Store;
- k. if you or your owners finance any part of the purchase price, you and they agree before the transfer's proposed effective date that the transferee's obligations under promissory notes, agreements, or security interests reserved in the Operating Assets, the Store (including its physical structure), or ownership interests in you are subordinate to the transferee's (and its owners') obligation to pay Royalties, Brand Fund contributions, Tech Fees, and other amounts due to us and our affiliates and otherwise to comply with this Agreement;
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to the 2025 FDD, if a 7 Brew franchisee plans to transfer their store to a new owner and they (or their owners) finance any part of the purchase price, they must agree that the new owner's obligations to 7 Brew take priority. Specifically, before the transfer, the transferring franchisee must agree that the new owner's obligations to pay royalties, brand fund contributions, tech fees, and other amounts due to 7 Brew and its affiliates, as well as their obligation to comply with the Franchise Agreement, are superior to any promissory notes, agreements, or security interests related to the purchase.
This requirement protects 7 Brew's ongoing revenue stream and ensures that the financial health of the franchise system is not jeopardized by private financing arrangements between the transferring franchisee and the new owner. It means that if the new owner experiences financial difficulties, 7 Brew will be in a primary position to receive payments before the previous owner who provided financing.
For a prospective franchisee, this condition highlights the importance of carefully evaluating the financial stability of any potential buyer if they plan to sell their 7 Brew franchise in the future and provide financing. It also underscores the need to ensure that the terms of any financing offered do not conflict with the new owner's obligations to 7 Brew. This requirement is fairly typical in franchising, as franchisors want to ensure the financial viability of the new franchisee and protect their royalty stream.