When transferring an Annex Brands franchise, does the transferee need to execute the then-current franchise agreement?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
The proposed transferee or its owners must be individuals of good moral character and otherwise meet Franchisor's then-applicable standards for franchisees.
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.
Source: Item 22 — Contracts (FDD pages 109–110)
What This Means (2025 FDD)
According to Annex Brands' 2025 Franchise Disclosure Document, if a franchisee seeks to transfer their franchise, the transferee will be required to execute the then-current franchise agreement. Specifically, if the transfer is of a controlling interest, the transferee, including all officers, directors, or partners, must jointly and severally agree to be bound by all the terms and conditions of the current franchise agreement and other standard ancillary agreements. However, the document specifies that no additional initial franchise fee will be charged in this case.
This requirement ensures that the Annex Brands franchise system maintains uniformity and that all franchisees operate under the same set of rules and standards. By requiring the transferee to sign the current franchise agreement, Annex Brands can implement updated operational requirements, fee structures, and reporting obligations. This protects the brand's integrity and ensures consistent customer experience across all locations.
However, the FDD also states that a transfer has the effect of superseding the previous franchise agreement when a new franchise agreement is entered into with the transferee. This means that the new agreement will replace the old one, and the transferee will be bound by the terms of the new agreement. 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.
Furthermore, the Annex Brands FDD outlines several other conditions that must be met for the franchisor to approve a transfer. These include ensuring the transferee meets Annex Brands' standards for franchisees and that the franchisee is in full compliance with all agreements with Annex Brands. The transferring franchisee may also need to execute a non-competition covenant. These conditions are designed to protect Annex Brands' interests and ensure the continued success of the franchise system.