Does an Auntie Annes franchisee remain liable for pre-transfer obligations after a non-control transfer?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in Franchise Agreement | Summary |
|---|---|---|
| o. You must comply with our right of first refusal. p. If you operate a Co-Branded Shop, the Co-Branded Agreement or Co- Branded Franchise are transferred at the same time. | ||
| FA: 16.4 (non-control transfers) | a. You give us prior written notice of the transfer. b. You pay all sums owed. c. You are not in default d. Transferee meets qualifications e. Transferee signs assignment and guaranty f. You and your guarantors and owners sign a general release. g. You remain liable for pre-Transfer obligations. h. You pay us a Transfer Fee. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTIONS (FDD pages 86–91)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, a franchisee remains liable for pre-transfer obligations even after a non-control transfer. This means that if a franchisee transfers their business in a way that doesn't result in a change of control, they are still responsible for any debts, liabilities, or other obligations that were incurred before the transfer took place.
Specifically, the FDD outlines several conditions that must be met for a non-control transfer to be approved. These include providing prior written notice to Auntie Annes, paying all outstanding sums owed, not being in default of the franchise agreement, ensuring the transferee meets qualifications, and having the transferee sign an assignment and guaranty. Additionally, both the franchisee and their guarantors and owners must sign a general release.
This continued liability for pre-transfer obligations is a significant consideration for any Auntie Annes franchisee looking to sell or transfer their business. It's crucial to ensure that all financial and contractual obligations are met before the transfer to avoid potential future liabilities. Franchisees should seek legal and financial advice to fully understand the implications of this clause and to ensure a smooth and legally sound transfer process.