In the Bang Cookies franchise agreement, what is the consequence of an actual transfer of ownership interests made in violation of the agreement's terms?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
(15) Franchisee and transferee acknowledge and agree that Franchisor's approval of the Transfer indicates only that the transferee meets, or Franchisor waived, the criteria established by Franchisor for franchisees as of the time of such transfer, and Franchisor's approval thereof does not constitute a warranty or guaranty by Franchisor, express or implied, of the suitability of the terms of sale, successful operation, or profitability of the Franchised Business;
(16) Franchisee and transferee acknowledge and agree that Franchisor's approval of the Transfer at issue does not constitute Franchisor's approval of future or other Transfers or the waiver of the requirement that Franchisor must approve such future or other Transfers in accordance with this Agreement;
(17) The Transfer must be made in compliance with all applicable laws;
(18) The Transfer of the Franchised Business, the lease for Franchisee's Bang Cookies Shop Facility, Shop Location and the assets of the Franchised Business shall be made only in conjunction with a Transfer of this Agreement, approved by Franchisor in accordance with and subject to this Article 14 and the terms and conditions of this Agreement; and
(19) Franchisor's consent to a Transfer of any interest that is subject to the restrictions of this Agreement shall not constitute a waiver of any claims it may have against Franchisee or deemed a waiver of Franchisor's right to demand strict and exact compliance with this Agreement by the transferee.
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
Based on the 2024 Bang Cookies Franchise Disclosure Document, a transfer of ownership interests made in violation of the franchise agreement's terms can have significant consequences. The document outlines various conditions and requirements that must be met for a transfer to be approved by Bang Cookies. These include ensuring the transferee is bound by the agreement, assumption of obligations, execution of a general release, and potentially the execution of the then-current standard form Franchise Agreement.
If a transfer occurs without the franchisor's approval or without adhering to the specified conditions, Bang Cookies retains certain rights and is not deemed to have waived any claims against the franchisee. Specifically, the franchisor's approval of a transfer only indicates that the transferee meets the criteria at that time and does not constitute a warranty of the business's future success or profitability. Furthermore, approval of one transfer does not waive the requirement for future transfers to be approved.
Additionally, the franchise agreement stipulates that the transfer must comply with all applicable laws and be made in conjunction with a transfer of the franchise agreement itself. Bang Cookies's consent to a transfer does not waive any claims it may have against the franchisee or the right to demand strict compliance with the agreement by the transferee. Therefore, franchisees must adhere to all transfer requirements to avoid potential breaches of the franchise agreement and any associated penalties.