Under what circumstances does an Azal Coffee franchisee assign their rights to the lease to the franchisor?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
- 3. Franchisor's Options. Landlord and Franchisee grant to Franchisor the exclusive right, exercisable at the option of Franchisor, to be assigned all right, title and interest of Franchisee in and to the Lease and the Premises:
- a. on the expiration or termination of the Franchise Agreement. Franchisor must give written notice of its intent to exercise this option within thirty (30) days of the event triggering the option;
- b. on the expiration or termination of the Lease or on Franchisee's loss of its rights of possession to the Premises, whether by Franchisee's default under the Lease or otherwise. Landlord shall provide Franchisor notice of default as provided under Section 9 and Section 10. Franchisor shall exercise its right to accept assignment of the Lease within such periods; and
- c. on Franchisees abandonment of the Premises. For this purpose, abandonment will be conclusively presumed if Franchisee fails to have the business open and fully operational for two (2) consecutive days.
On the giving of notice of exercise by Franchisor under this Section, the Lease, and all right, title and interest of Franchisee under the lease and to the Premises will be automatically, and without need of further instrument, assigned to Franchisor. If Franchisor does not give notice of exercise within the applicable time period, Franchisor will be deemed to have forfeited all its rights under this Section. Landlord and Franchisee agree to execute documents confirming this assignment in the form presented by Franchisor, including a short form of Lease suitable for recording.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, the franchisee grants the franchisor the exclusive right to be assigned all rights, title, and interest in the lease and premises under certain conditions.
The first condition is upon the expiration or termination of the Franchise Agreement. In this case, Azal Coffee must provide written notice of its intent to exercise this option within thirty days of the event that triggers the option. The second condition occurs upon the expiration or termination of the lease, or if the franchisee loses possession of the premises due to default or other reasons. The landlord is required to notify Azal Coffee of any default, and Azal Coffee must then exercise its right to accept the lease assignment within the specified time periods. Lastly, assignment occurs if the franchisee abandons the premises. Abandonment is conclusively presumed if the franchisee fails to keep the business open and fully operational for two consecutive days.
Upon Azal Coffee giving notice of exercising its option, the lease and all rights, title, and interest of the franchisee are automatically assigned to Azal Coffee without needing any further documentation. If Azal Coffee does not provide notice within the applicable time period, it forfeits its rights. Both the landlord and franchisee must execute documents confirming this assignment, including a short form of lease suitable for recording.
This clause protects Azal Coffee by ensuring they can maintain control over the location if a franchisee leaves or defaults, allowing for continued operation of the franchise at that site. However, the franchisee remains liable for any outstanding amounts or defaults that occurred before the assignment's effective date, while Azal Coffee is not liable for the franchisee's debts or defaults before taking over the lease.