Does Bang Cookies have a right of first refusal to purchase the assets of a franchise?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
Provided Franchisee and each Owner and Spouse, respectively, are in substantial compliance with this Agreement and the Ancillary Agreements, and Franchisor does not elect to exercise Franchisor's right of first refusal as set forth in Article 14.F. below, Franchisor shall not unreasonably withhold its approval of a Transfer by Franchisee or an Owner. The proposed transferee (including such assignee's owner(s) and spouse(s) if the proposed transferee is a Corporate Entity) must be of good moral character, have sufficient business experience, aptitude and financial resources to own and operate a Bang Cookies Shop, and otherwise meet Franchisor's then applicable standards for franchisees as determined by Franchisor in its sole, but reasonable discretion. Furthermore, the proposed transferee and the proposed transferee's owners and spouses may not own or operate, or intend to own or operate, a Competitive Business. Franchisee agrees that Franchisor may condition approval of a Transfer upon Franchisee's satisfaction (either before, or contemporaneously with, the effective date of the Transfer) of the following:
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies' 2024 Franchise Disclosure Document, Bang Cookies does have a right of first refusal regarding the transfer of a franchise. Specifically, before a franchisee can transfer their franchise to a third party, Bang Cookies has the option to step in and purchase the franchise themselves, preventing the transfer to the proposed transferee.
This right of first refusal is conditional. The franchisee and all owners/spouses must be in substantial compliance with the Franchise Agreement and any related agreements. If Bang Cookies chooses not to exercise its right of first refusal, it cannot unreasonably withhold approval of the transfer, provided the proposed transferee meets Bang Cookies' standards for franchisees. These standards include good moral character, sufficient business experience, aptitude, and financial resources to operate a Bang Cookies shop. The proposed transferee also cannot own or operate a competitive business.
For a prospective Bang Cookies franchisee, this means that selling their franchise may not be as straightforward as finding a buyer and completing the transaction. Bang Cookies has the first opportunity to buy the franchise, which could potentially delay or complicate the sale. However, this also provides some assurance that Bang Cookies is invested in maintaining the brand's standards and has a mechanism to control who enters the franchise system. Franchisees should ensure they remain in compliance with the franchise agreement to facilitate a smoother transfer process, should they decide to sell.