What is the procedure for an Alloy franchisee to obtain consent to transfer the franchise?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: RECEIPTS]
TRANSFER OF FRANCHISE
You agree that the following provisions govern any transfer or proposed transfer:
- A.
Transfers.
We have entered into this Agreement with specific reliance upon your financial qualifications, experience, skills and managerial qualifications as being essential to the satisfactory operation of the Facility.
Consequently, neither your interest in this Agreement nor in the Facility may be transferred or assigned to or assumed by any other person or entity (the "assignee"), in whole or in part, unless you have first tendered to us the right of first refusal to acquire this Agreement in accordance with subparagraph 11.F, and, if we do not exercise such right, unless our prior written consent is obtained, the transfer fee provided for in subparagraph 11.C is paid, and the transfer conditions described in subparagraph 11.D are satisfied.
Any sale (including installment sale), lease, pledge, management agreement, contract for deed, option agreement, assignment, bequest, gift or otherwise, or any arrangement pursuant to which you turn over all or part of the daily operation of the business to a person or entity who shares in the losses or profits of the business in a manner other than as an employee will be considered a transfer for purposes of this Agreement.
Specifically, but without limiting the generality of the foregoing, the following events constitute a transfer and you must comply with the right of first refusal, consent, transfer fee, and other transfer conditions in this Paragraph 11:
Any change in the percentage of the franchisee entity owned, directly or indirectly, by any Owner (including any addition or deletion of any person or entity who qualifies as an Owner) that results in a 20% or more change of ownership interest;
Any change in the general partner of a franchisee that is a general, limited or other partnership entity;
For purposes of this subparagraph 11.A, a pledge or seizure of any ownership interests in you or in any Owner that affects the ownership of 20% or more of you or any Owner, which we have not approved in advance in writing; or
Any grant of a security interest in, or otherwise encumbrance of, any of the assets or securities of you, including the Facility unless you satisfy our requirements.
[Item 23: RECEIPTS]
The application must indicate whether you or an Owner proposes to retain a security interest in the property to be transferred.
No security interest may be retained or created, however, without our prior written consent and except upon conditions acceptable to us.
Any agreement used in connection with a transfer will be subject to our prior written approval, which approval will not be withheld unreasonably.
You immediately must notify us of any proposed transfer and must submit promptly to us the application for consent to transfer and any other required documents and information.
Any attempted transfer by you without our prior written consent or otherwise not in compliance with the terms of this Agreement will be void, your interest in this Agreement will be voluntarily abandoned, and it will provide us with the right to elect either to deem you in default and terminate this Agreement or to collect from you and the guarantors a transfer fee equal to two times the transfer fee provided for in subparagraph 11.C.
- C.
Transfer Fee.
You must pay to us a transfer fee in the amount of $10,000.
The transfer fee is nonrefundable even if, for any reason, the proposed transfer does not occur.
- D.
Conditions of Transfer.
We condition our consent to any proposed transfer, whether to an individual, a corporation, a partnership or any other entity upon the following:
Assignee Requirements.
The assignee must meet all of our then-current requirements for our ALLOY franchise program we are offering at the time of the proposed transfer and sign our then-current form of franchise agreement modified to reflect the term remaining under this Agreement.
Payment of Amounts Owed.
All amounts owed by you to us, or any of our affiliates, your suppliers or any landlord for the Facility premises and Facility, or upon which we or any of our affiliates have any contingent liability must be paid in full.
Reports.
You must have provided all required reports to us in accordance with subparagraphs 9.H and I.
Modernization.
You must have complied with the provisions of subparagraph 5.E.
Guarantee.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, franchisees must adhere to specific procedures to transfer their franchise. Alloy emphasizes that the franchise agreement was entered into with reliance on the franchisee's financial qualifications, experience, skills, and managerial qualifications. Therefore, franchisees cannot transfer their interest in the agreement or the facility to another party without first offering Alloy the right of first refusal. If Alloy declines to exercise this right, the franchisee must then obtain Alloy's prior written consent, pay a transfer fee, and satisfy certain transfer conditions. Any attempt to transfer the franchise without Alloy's consent or compliance with the agreement terms will be considered void, resulting in voluntary abandonment of the agreement and Alloy having the right to either terminate the agreement or collect a transfer fee equal to two times the standard transfer fee. The standard transfer fee is $10,000, so non-compliance could result in a $20,000 fee.
To gain Alloy's consent, a franchisee must immediately notify Alloy of any proposed transfer and promptly submit an application for consent, along with any other required documents and information. The application must specify whether the franchisee or an owner intends to retain a security interest in the property to be transferred; however, no security interest can be retained or created without Alloy's prior written consent and under conditions acceptable to them. Any agreement used for the transfer is subject to Alloy's prior written approval, which Alloy states will not be unreasonably withheld.
Alloy conditions its consent to any proposed transfer on several factors. The assignee must meet all of Alloy's then-current requirements for new franchisees and sign Alloy's current form of franchise agreement, modified to reflect the remaining term of the original agreement. Additionally, all amounts owed by the franchisee to Alloy, its affiliates, suppliers, or the landlord for the facility premises must be paid in full. The franchisee must also have provided all required reports to Alloy and complied with modernization provisions. These conditions ensure that the new franchisee is qualified and that all financial obligations are met before the transfer is approved.
In practical terms, this means a prospective Alloy franchisee needs to be aware of the detailed steps and financial implications involved in transferring their franchise. They should maintain good standing with Alloy by submitting all required reports and fulfilling financial obligations to avoid complications during a potential transfer. Understanding these requirements upfront can help franchisees plan for future transitions and ensure compliance with Alloy's procedures.