What is Alloy's right of first refusal regarding the transfer of the Franchise Agreement?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, Alloy has the right of first refusal if a franchisee wishes to transfer their interest in the Franchise Agreement. This means that before a franchisee can transfer or assign their agreement to another party, they must first offer Alloy the opportunity to acquire the agreement themselves. Alloy can then decide whether or not to purchase the franchise under the same terms offered to the third party.
This right is in place because Alloy has entered into the agreement with specific reliance on the franchisee's qualifications, experience, skills, and managerial abilities. These qualities are considered essential to the successful operation of the Alloy facility. Therefore, Alloy wants to ensure that any new franchisee meets their standards and is capable of maintaining the brand's reputation and quality of service.
The FDD specifies that any sale, lease, pledge, management agreement, or any arrangement that turns over the daily operation of the business to another party who shares in the profits or losses is considered a transfer. Changes in ownership of the franchisee entity that result in a 20% or more change of ownership interest, changes in the general partner of a franchisee, and the pledge or seizure of ownership interests affecting 20% or more of the franchisee also constitute a transfer. Before any of these events can occur, Alloy must be given the right of first refusal.
If Alloy chooses not to exercise its right of first refusal, the franchisee can proceed with the transfer to the third party, provided they obtain Alloy's written consent, pay a transfer fee, and satisfy other transfer conditions outlined in the Franchise Agreement. This ensures that Alloy maintains control over who operates Alloy franchises and protects the brand's integrity.