What constitutes a 'transfer' by the franchisee according to the Aw franchise agreement?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
| PROVISION | SECTION | SUMMARY |
|---|---|---|
| IN FRANCHISE AGREEMENT | ||
| k. "Transfer" by franchisee – definition | Section 14.2. | Includes transfer of any interest in Franchise Agreement, Papa Ray's Pizza Restaurant or a substantial portion of its assets or ownership change in franchisee. |
| l. Franchisor approval of transfer by franchisee | Sections 14.2 and 14.3 | Except for transfer to entity controlled by you, we have right to approve all transfers, but will not unreasonably withhold approval. Transfer to an entity is effective upon 30 days' notice to us once you sign our assignment agreement and all owners guaranty the franchise agreement obligations of the entity. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 34–36)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, a 'transfer' by the franchisee is comprehensively defined within Section 14.2 of the franchise agreement. This definition extends beyond a simple sale of the franchise. It encompasses the transfer of any interest in the Franchise Agreement itself, the Papa Ray's Pizza Restaurant, or a substantial portion of the restaurant's assets. Furthermore, a change in the ownership of the franchisee's business also constitutes a transfer under the agreement.
This broad definition of 'transfer' has significant implications for Aw franchisees. It means that any change in ownership structure, even if it doesn't involve selling the entire franchise, is subject to Aw's approval. This includes selling a portion of the business, taking on a new partner, or even changes in the ownership of a corporate franchisee. Franchisees need to be aware that any such action requires careful consideration and adherence to the transfer provisions outlined in the franchise agreement.
The FDD specifies that Aw's approval is required for all transfers, except for transfers to an entity controlled by the franchisee. However, even in the case of a transfer to a controlled entity, the franchisee must provide 30 days' notice to Aw and ensure that all owners of the entity guarantee the franchise agreement obligations. This highlights the importance of understanding and complying with the specific requirements for transfers, as failure to do so could result in a breach of the franchise agreement. This level of franchisor oversight is fairly typical in the franchise industry, as franchisors want to ensure that any new operators meet their standards and are financially stable.
Prospective Aw franchisees should carefully review Section 14.2 and 14.3 of the franchise agreement to fully understand the implications of these transfer provisions. It is also advisable to discuss any planned changes in ownership or business structure with Aw to ensure compliance and avoid potential disputes.