How is 'transfer' defined in the Aplus Development Agreement?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Development | Summary | |
|---|---|---|---|
| Agreement | |||
| a. | Length of the Agreement term | Section 2.1 | The period beginning on the effective date and ending on the earlier of: (i) the date on which you have completed your development obligations, or (ii) 12:00 midnight CST on the last day specified in the development schedule. |
| b. | Renewal or extension of the term | No provision | Not applicable. |
| c. | Requirements for Developer to renew or extend | No provision | Not applicable |
| d. | Termination by Developer | No provision | Not applicable |
| e. | Termination by the franchisor without cause | No provision | Not applicable |
| f. | Termination by the franchisor with "cause" | Sections 9.1, 9.2., 9.3, 9.4, 9.5, and 9.6 | We can terminate if you materially default under your development agreement, an individual franchise agreement, or any other agreement between you or your affiliate and us. In the event of the death or permanent incapacity of an owner, we may terminate if you fail to adhere to the applicable transfer requirements. |
| g. | "Cause" defined - curable defaults | Sections 9.3, 9.4, 9.5, and 9.6 | You have 10 days to cure a failure to pay fees and 30 days to cure any other default, and in the case of a breach or default in the performance of your obligations under any franchise agreement or other agreement between you and us. |
| h. | "Cause" defined – non curable defaults | Sections 9.1 and 9.2 | Non-curable defaults: unapproved transfers; failure to meet development obligation; any breach of confidentiality or unfair competition described in Section 10; cross defaults, bankruptcy, foreclosure, insolvency, conviction of a felony, misrepresentations in your application, and/or repeated defaults, even if cured. |
| i. | Developer's obligation on termination/non-renewal | Sections 2.2 and 10.2 | You will have no further right to develop or operate additional APLUS Stores which are not, at the time of termination, the subject of a then existing franchise agreement between you and us. You may continue to own and operate all APLUS Stores under then existing Franchise Agreements. |
| j. | Assignment of contract by franchisor | Section 8.1 | No restrictions on our right to assign. |
| k. | "Transfer" by Developer – defined | Section 8.2 | Includes transfer of the agreement, changes in ownership of the e |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 53–64)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, a transfer by the developer includes several scenarios. It encompasses the transfer of the development agreement itself, changes in the ownership of the business entity that is party to the agreement, and transfers of assets. However, the offering of shares for sale through public securities is an exception.
For a prospective Aplus developer, this definition is important because any of these actions would be considered a transfer and subject to the conditions outlined in the Development Agreement. This includes obtaining prior written consent from Aplus, which Aplus may withhold for any reason based on their subjective judgment. However, transfers that do not result in a change of control may be completed without prior written consent, provided certain conditions are met as described in the development agreement.
Furthermore, the FDD states that you may not transfer any franchise agreement signed under the development agreement, except with Aplus's written consent and a simultaneous assignment of the development agreement and all of the franchise agreements signed under the development agreement to the same assignee. Additionally, the developer must pay the applicable transfer fee and sign a general release. These stipulations ensure that Aplus maintains control over who becomes a developer and franchisee within their system, and that all obligations are properly transferred to the new party.