Does the Annex Brands franchise agreement allow for transfers of interest in the Center?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
FRANCHISEE MAY NOT TRANSFER WITHOUT FRANCHISOR APPROVAL.
Franchisee understands and acknowledges that the rights and duties created by this Agreement are personal to Franchisee or its owners and that Franchisor has granted rights to Franchisee under this Agreement in reliance upon the individual or collective character, skill, aptitude, attitude, business ability, and financial capacity of Franchisee or its owners.
Accordingly, without the prior written approval of Franchisor, the Franchise (or any interest in the Franchise), this Agreement (or any interest in this Agreement), the Center (or any interest in the Center), or the assets of the Center that are not purchased for resale (or any interest in such assets), may not be voluntarily, involuntarily, directly or indirectly, assigned, sold or otherwise transferred by Franchisee or any owner of Franchisee.
Any such assignment, sale or other transfer without Franchisor's approval is a default of this Agreement and conveys no rights to or interests in the Franchise, this Agreement, the Center or the assets of the Center that are not assets purchased for resale, or Franchisee.
Assignments, sales or other transfers subject to the foregoing restriction include, without limitation, the following:
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- sale, gift or other transfer of capital stock, or of a partnership, LLC or other ownership interest, in Franchisee;
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- merger or consolidation of Franchisee with another corporation, or issuance of capital stock, partnership, LLC or other ownership interests in Franchisee;
Source: Item 22 — Contracts (FDD pages 109–110)
What This Means (2025 FDD)
According to Annex Brands's 2025 Franchise Disclosure Document, franchisees can transfer their interest in the franchise, the Franchise Agreement, the Center, or the assets of the Center, but only with prior written approval from Annex Brands. Any transfer without this approval constitutes a default of the Franchise Agreement and conveys no rights to the transferee. This restriction covers various scenarios, including the sale or gift of stock or ownership interests in the franchisee entity, as well as mergers or consolidations.
Annex Brands's approval of a transfer is contingent on several conditions. The franchisee and its owners must be in full compliance with the Franchise Agreement. The proposed transferee must meet Annex Brands's standards for franchisees. If the transfer involves a controlling interest, the transferee must execute the then-current franchise agreement and ancillary agreements. A transfer supersedes the previous franchise agreement, and a new Protected Area will be granted to the transferee, which may be smaller than the original. The franchisee must also pay all outstanding fees and debts to Annex Brands and its affiliates.
Additional conditions for transfer approval include obtaining the lessor's consent for assignment or sublease of the Center, payment of a transfer fee (15% of the then-current non-discounted initial franchise fee), and execution of general releases of claims against Annex Brands. The transferee must also deposit $5,500 for a new marketing program and pay any applicable software license transfer fees. If Annex Brands's sales consultants are used, the franchisee or transferee must reimburse Annex Brands for any commissions paid. Annex Brands also has a right of first refusal to purchase the interest in the Franchise, the Center, or the ownership interest in Franchisee for the price and on the terms and conditions contained in the offer.
In the event of death or permanent disability, the franchisee's ownership interest must be transferred to a third party approved by Annex Brands within six months, subject to the standard transfer terms. The franchise can be assigned to a legal entity managed and controlled by the franchisee. These transfer provisions ensure that Annex Brands maintains control over who operates its franchises and that certain financial and operational obligations are met during the transfer process.