After an approved transfer of a Bang Cookies franchise, who is responsible for obligations that arose before the transfer?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
r the Ancillary Agreements;
- (4) The transferee shall be bound by all terms and conditions of this Agreement, and each owner of the transferee and their respective spouses shall personally execute the Franchise Owner and Spouse Agreement and Guaranty in the form attached to this Agreement as Exhibit 1. Each owner of the transferee shall also be required to execute such further agreements designated by Franchisor whereby the proposed transferee assumes each and every obligation and responsibility of Franchisee as set forth in this Agreement;
- (5) All obligations of Franchisee under this Agreement and the Ancillary Agreements shall be assumed by the transferee, each individual owner of transferee, and their respective spouses in a manner satisfactory to Franchisor;
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies's 2024 Franchise Disclosure Document, both the franchisee (seller) and the transferee (buyer) share responsibility for obligations arising before a franchise transfer. Specifically, the original Bang Cookies franchisee remains liable to the franchisor for all obligations outlined in the Franchise Agreement, even after the transfer.
In addition, the transferee is required to assume all obligations of the franchisee under the Franchise Agreement and any Ancillary Agreements. This assumption must be satisfactory to Bang Cookies. The owners and spouses of the transferee must also agree to this assumption. The franchisee, owners, and spouses must execute a General Release, releasing Bang Cookies from any claims for matters arising on or before the transfer date.
This dual responsibility ensures that Bang Cookies is protected in the event of a transfer. It also means that a prospective Bang Cookies franchisee needs to carefully evaluate all outstanding obligations of the seller before completing the purchase, as they will be assuming those liabilities. This is a common practice in franchising, as franchisors want to ensure a smooth transition and continued compliance with the franchise agreement.