Can an Aw franchisee indirectly assign their franchise without Aw's prior written approval?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.2 By Franchisee With Approval. You understand and acknowledge that the rights and duties created by this Agreement are personal to you and we have granted the franchise in reliance upon the individual or collective character, skill, aptitude, attitude, business ability and financial capacity of you (and your Owners). Therefore, except as otherwise provided in Paragraph 14.5 below, neither the franchise, your Papa Ray's Pizza Restaurant or a substantial portion of the assets of your Papa Ray's Pizza Restaurant (or any interest therein) nor any part or all of the ownership of an entity that is the Franchisee may be voluntarily, involuntarily, directly or indirectly, assigned, sold, subdivided, subfranchised or otherwise transferred by you or your Owners (including, without limitation, by merger or consolidation, by issuance of additional securities representing an ownership interest in the Franchisee, or in the event of the death of the Franchisee or an Owner of the Franchisee, by will, declaration of or transfer in trust or the laws of intestate succession) without our prior written
approval. Further, neither your Papa Ray's Pizza Restaurant nor a substantial portion of its assets may be transferred without a concurrent transfer of this Agreement and the franchise rights granted hereunder to the same transferee. Any such assignment or transfer without our prior written approval will constitute a breach of this Agreement and will convey no rights to or interests in the franchise, the franchisee entity, your Papa Ray's Pizza Restaurant or its assets.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, a franchisee cannot directly or indirectly assign, sell, or transfer their franchise, Papa Ray's Pizza Restaurant, or a substantial portion of its assets, or any ownership interest in the franchisee entity without prior written approval from Aw. This restriction applies to various forms of transfer, including those occurring through merger, consolidation, issuance of additional securities, or inheritance due to death. Any transfer or assignment conducted without Aw's written consent constitutes a breach of the franchise agreement and will not grant any rights or interests to the transferee.
This requirement ensures that Aw maintains control over who operates its franchises and upholds brand standards. Aw grants franchises based on the individual or collective character, skills, aptitude, business ability, and financial capacity of the franchisee and their owners. Therefore, Aw needs to approve any changes in ownership to ensure that the new owner meets their standards.
Paragraph 14.5 outlines an exception: if the franchisee is not an entity upon execution of the agreement, the franchisee can assign the franchise to a newly created entity that operates only the Papa Ray's Pizza Restaurant, is actively managed by the franchisee, and is wholly owned and controlled by the franchisee. This assignment requires Aw's approval of the agreement's form and substance, but no transfer fee is payable. The organizational documents of the new entity must state that the issuance and assignment of any interest in the entity is restricted by Section 14 of the agreement, and all ownership certificates must reflect these restrictions. All owners of the new entity must execute the Guaranty and Assumption of Obligations.
Prospective Aw franchisees should be aware of these restrictions on transfer and assignment, as they significantly impact the ability to sell the franchise or change its ownership structure. Franchisees should carefully consider these terms and discuss any potential exit strategies with Aw before entering into the franchise agreement.