In an Auntie Annes franchise transfer, what must the transferee do regarding the existing obligations under the Franchise Agreement?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
feree, its affiliates, or any of its directors, officers, shareholders, partners, members, or managers owns an interest in another Business or another franchise licensed by one of our affiliates, those individuals or Entities must (i) at the time of the Transfer request or the Transfer closing, not be in default in any material respect under any agreement with us, any of our affiliates, or any suppliers, (ii) during the previous two years, not have been in default in any material respect under any agreement with us, our affiliates, or any suppliers without curing such default within the applicable cure period, and (iii) in our sole judgment, have been approved to develop and operate additional franchises.
- F. Notwithstanding when the Franchised Business was last remodeled, the transferee agrees in writing that it will, at its expense, upgrade, and remodel the Franchised Business to conform to our then-current Standards for quality and appearance and trade dress within the time we reasonably specify; provided, however, if the Franchised Business conforms to our then-current Standards for appearance, the transferee will only address all items identified in the last quality assurance inspection, within the time we reasonably state.
- G. The transferee signs our then-current form of franchise agreement and all other then-current related agreements as we require of new franchisees generally provided, however, the transferee will not be required to pay the initial franchise fee stated in the new franchise agreement and the term of the new franchise agreement will expire on the expiration date of the Term of this Agreement. The terms of our then-current franchise agreement, including the fees, may be materially different than the terms of this Agreement.
- H.
Source: Item 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
According to Auntie Annes' 2024 Franchise Disclosure Document, a transferee in a franchise transfer must adhere to several conditions regarding the existing obligations under the Franchise Agreement. The transferee must sign Auntie Annes' then-current form of franchise agreement and all other related agreements that Auntie Annes requires of new franchisees generally. However, the transferee is not required to pay the initial franchise fee stated in the new franchise agreement, and the term of the new franchise agreement will expire on the expiration date of the original agreement's term.
Additionally, the transferee (and any owners with a legal or beneficial interest, as required by Auntie Annes) must enter into a written assignment, in a form satisfactory to Auntie Annes, assuming and agreeing to discharge and guarantee all of the transferor's obligations under the original agreement. They must also execute Auntie Annes' then-current form of personal guarantee. The transferee must also agree in writing to upgrade and remodel the franchised business to meet Auntie Annes' then-current standards for quality, appearance, and trade dress within a reasonable timeframe specified by Auntie Annes. However, if the business already conforms to these standards, the transferee only needs to address items identified in the last quality assurance inspection within a reasonable timeframe.
Furthermore, both the transferor and transferee, along with their owners and guarantors, must deliver a written and duly signed general release to Auntie Annes, in a form prepared by Auntie Annes at their sole expense. This release covers all claims against the released parties and indemnifies them against any statements, representations, or warranties made by the transferor to the transferee. Auntie Annes must also receive a fully-signed copy of all transfer documents. These measures ensure that the transferee is fully committed to upholding the standards and obligations of the Auntie Annes franchise system, while also protecting Auntie Annes from potential liabilities arising from the transfer.