Does Azal Coffee have an option to purchase my business, and if so, under what circumstances?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in Agreement | Summary |
|---|---|---|
| franchise. Sublicensing of your rights is not a permitted transfer. | ||
| l. Our approval of a transfer by you | Sections 14.2 and 14.3 of Franchise Agreement | You must have our written consent to transfer your franchise. We will not unreasonably withhold consent to a permitted transfer. |
| m. Conditions for our approval of the transfer | Section 14.3 of Franchise Agreement | The proposed transferee meets the conditions we have set for any new franchisee; we find the terms of the proposed transfer to be reasonable , you must be in compliance with all obligations to us and must pay us and all suppliers all monies owing; release signed by you; the new franchisee completes training; the new franchisee signs, at our option, a new Franchise Agreement on the standard form in use by us at the time of the transfer or an assumption of the existing Franchise Agreement; transfer fee paid; you or the proposed transferee must take action specified by us to comply with current appearance, equipment, and signage requirements; proposed transferee and affiliates are not in competition with a Azal Coffee; subordination agreement signed by you (if installment payments required); landlord permits assignment of lease; and you and the proposed transferee comply with other standard procedures specified by us. |
| n. Our right of first refusal | Section 14.2 of | We can match any offer for the |
| to acquire your business | Franchise Agreement | purchase of your business. |
| o. Our option to purchase | Section 16.3 of | We have the option to purchase the |
| your business | Franchise Agreement | assets of your business for fair market value on termination or expiration of your franchise. |
| p. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 42–47)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, Azal Coffee has two options to purchase a franchisee's business. First, under Section 14.2 of the Franchise Agreement, Azal Coffee has the right of first refusal, meaning they can match any offer a franchisee receives from a third party for the purchase of their business. This allows Azal Coffee to control who enters the system and prevents unwanted competition or brand dilution.
Second, according to Section 16.3 of the Franchise Agreement, Azal Coffee has the option to purchase the assets of a franchisee's business if the franchise is terminated or expires. In this case, the purchase price will be the fair market value of the business assets. This provides Azal Coffee with a mechanism to reacquire locations, ensuring continuity of the brand and potentially allowing them to resell the franchise to a new operator.
For a prospective franchisee, this means that selling their Azal Coffee franchise is not entirely within their control. Azal Coffee has the ability to step in and purchase the business themselves, either by matching an outside offer or when the franchise term ends. It is important for potential franchisees to understand these conditions and factor them into their long-term business plans and exit strategies.