If a franchisee is in default of the Annex Brands agreement, can they transfer the franchise?
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' 2025 Franchise Disclosure Document, a franchisee's ability to transfer the franchise when in default is restricted. The FDD states that any assignment, sale, or other transfer without Annex Brands' approval is considered a default of the Franchise Agreement and conveys no rights to the franchise. This includes the sale, gift, or transfer of ownership interests in the franchisee entity.
This means that if an Annex Brands franchisee is in default of their agreement, they cannot transfer the franchise without prior written approval from Annex Brands. Attempting to do so would be a further breach of the agreement and would not be recognized by Annex Brands.
This provision protects Annex Brands by ensuring that the brand maintains control over who operates a franchise, even in situations where the current franchisee is failing to meet their obligations. It prevents a struggling franchisee from simply selling the business to an unqualified operator without the franchisor's consent. Prospective franchisees should understand that obtaining franchisor approval is essential before considering any transfer, especially if they are facing difficulties in operating the franchise.