Under what conditions will Azal Coffee consent to a proposed transfer of a franchise?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
- (i) You or the proposed transferee must take any action specified by us to make the Franchise Business comply with current appearance, Franchise Trade Dress, equipment, and signage requirements. We may require this action to be taken before the Transfer or within a specified period of time after the Transfer.
- (j) The proposed transferee and its owners, shareholders, officers, directors, partners, members, investors, employees and agents, and their Family Members and affiliates of the proposed transferee must not be an owner, shareholder, officer, director, partner, member, investor, employee, agent or consultant of or to a business that competes with Azal Coffee. On our request, the transferee may be required to sign an acknowledgement of compliance with this prohibition.
- (k) If the transfer involves installment payments by the transferee to the Seller, the Seller must sign a subordination agreement under which the Seller subordinates its right to receive any installment from the transferee to our right to receive all amounts due to us through the due date of the installment. The subordination agreement must be in a format and contain terms and conditions specified by us.
- (I) Your landlord must allow the lease for the Franchise Location to be transferred to the transferee.
- (m) You, the Seller, and the proposed transferee must comply with any other standard procedures specified by us.
You acknowledge that the conditions listed above are necessary for protection of the Franchise Marks and Franchise Systems and do not impose unreasonable restrictions on a Transfer.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, Azal Coffee outlines several conditions that must be met for the company to consent to a franchise transfer. These conditions are put in place to protect the franchise's brand and system standards.
First, either the current franchisee or the proposed new franchisee must take necessary steps to ensure the franchise business complies with Azal Coffee's current standards for appearance, trade dress, equipment, and signage. Azal Coffee may require these updates to be completed either before the transfer or within a specific timeframe after the transfer is finalized. Second, the proposed new franchisee (including its owners, shareholders, officers, etc.) cannot be involved with any business that competes with Azal Coffee. The new franchisee may need to sign an acknowledgement confirming they comply with this non-compete requirement.
Additionally, if the transfer involves the new franchisee making installment payments to the seller (the original franchisee), the seller must sign a subordination agreement. This agreement ensures that Azal Coffee's right to receive any outstanding payments from the franchisee takes precedence over the seller's right to receive installment payments. The landlord for the franchise location must also approve the transfer of the lease to the new franchisee. Finally, both the seller and the proposed new franchisee must adhere to any other standard procedures that Azal Coffee specifies for franchise transfers. By agreeing to these conditions, the franchisee acknowledges they are necessary to protect Azal Coffee's franchise marks and systems and are not unreasonable restrictions on the transfer.