What conditions must be met prior to transferring a controlling interest in an Annex Brands franchise?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
ranchisees. If the transfer is of a controlling interest in Franchisee, or is one of a series of transfers that in the aggregate constitute the transfer of a controlling interest in Franchisee, all of the following conditions must be met prior to, or concurrently with, the effective date of the transfer:
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- The transferee, including all its officers, directors or partners will jointly and severally execute the then-current franchise agreement and other standard ancillary agreements thereby agreeing to be bound by all the terms and conditions of those agreement(s) (except that no additional initial franchise fee will be charged). A transfer has the effect of superseding the previous franchise agreement, when a new franchise agreement is entered into with the transferee. A consequence of entering into a new franchise agreement is that a new Protected Area described in Attachment 3 will be granted to the transferee and this new Protected Area may be smaller in size than the original Protected Area. Franchisee should not represent to transferee that transferee will be granted the original Protected Area. There may be other changes, such as changed fee, payment, operational and reporting requirements.
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- Franchisee must pay all royalty fees, marketing fees, national convention participation deposits, technology services fees, insurance premiums, or other fees under this Agreement and all other agreements between Franchisee and Franchisor or any of its affiliates, expenses, equipment lease or rental payments and/or supplies payments, purchases from Franchisor and its affiliates, interest, late fees, or any other indebtedness to Franchisor or its affiliates. which are then due and unpaid.
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- To the extent such consent is required by the terms of the lease, the lessor of the Center must have consented to the assignment or sublease of the Center to the transferee.
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- Except as provided in this Agreement, in lieu of an initial fee, Franchisee or the transferee must pay Franchisor a transfer fee of 15% of the then-current non-discounted initial franchise fee for a standard Center. If Franchisee or transferee qualifies for the International Franchise Association's VetFran Program, a 25% discount will be applied to the transfer fee. In no event will more than one VetFran discount be applied to the transfer fee.
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- Except to the extent prohibited or restricted by applicable law, Franchisee and its owners must execute general releases, in forms satisfactory to Franchisor, of any and all claims against Franchisor and its affiliates and their respective officers, directors, employees, and agents. No sale, assignment, transfer, conveyance, encumbrance or gift of any interest in the Franchise or this Agreement will release Franchisee or any other party to the transfer from the obligations or covenants in this Agreement, unless there is a specific written release by Franchisor.
Source: Item 22 — Contracts (FDD pages 109–110)
What This Means (2025 FDD)
According to Annex Brands' 2025 Franchise Disclosure Document, several conditions must be met before a franchisee can transfer a controlling interest in their franchise. The proposed transferee must execute the then-current franchise agreement and ancillary agreements, agreeing to be bound by all terms and conditions, although no additional initial franchise fee will be charged. This new agreement supersedes the previous one and may result in a new protected area that is smaller than the original.
The franchisee must also ensure that all outstanding payments, including royalty fees, marketing fees, convention deposits, technology service fees, insurance premiums, and any other debts to Annex Brands or its affiliates, are paid in full. If required by the lease terms, the lessor of the center must consent to the assignment or sublease to the transferee. Additionally, the franchisee or transferee must pay a transfer fee of 15% of the then-current non-discounted initial franchise fee for a standard center. However, a 25% discount on the transfer fee is available if the franchisee or transferee qualifies for the International Franchise Association's VetFran Program.
Furthermore, the franchisee and its owners must execute general releases of all claims against Annex Brands and its affiliates, in a form satisfactory to Annex Brands, unless prohibited by law. The transferee must deposit $5,500 with Annex Brands for a new center/new owner marketing program. Before or at initial training, the transferee must pay the then-current software license transfer fees and obtain any required software and licenses from approved suppliers. If the franchisee uses Annex Brands' sales consultants, they must reimburse Annex Brands for any commissions paid to those consultants. Finally, any deposits the franchisee has with Annex Brands will be transferred to the transferee's account as of the transfer closing date, although the franchisee may negotiate reimbursement for this amount with the transferee.