What is the significance of the 'Right of First Refusal' mentioned in the Bang Cookies lease agreement rider?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
sfer, sublease, encumber and/or otherwise assign Tenant's interests in the Lease and/or the Leased Premises without the prior written consent of Franchisor. Without limitation to the foregoing, among other things, Tenant agrees that if Tenant wishes to transfer any interests in the Lease or the Leased Premises that Tenant must request the written
consent of Franchisor. If Tenant requests Landlord's consent to Tenant's amendment, transfer and/or assignment of Tenant's interests in the Lease and/or the Leased Premises and if Landlord is inclined to approve of such amendment, transfer and/or assignment that Landlord shall condition Landlord's approval upon Tenant also obtaining written consent from Franchisor.
- Upon the occurrence of (a) the termination, for any reason, of the Franchise Agreement; (b) the expiration, without renewal, of the Franchise Agreement; (c) Franchisor's exercise of Franchisor's Right of First Refusal granted to Franchisor in the Franchise Agreement; (d) Tenant's default under the terms of the Lease; and/or (e) Tenant's failure to exercise an option period under the terms of the Lease, Tenant and Landlord acknowledge and agree, that:
Franchisor will have the option, but not the obligation, to assume or renew the Lease and the occupancy of the Leased Premises, including the right to sublease to another Franchisee of the Bang Cookies Franchise System, for all or any part of the remaining term of the Lease and, in connection with said assumption, Franchisor will not be obligated to pay to Landlord more than two months past due rent, real estate taxes and common area maintenance charges. In the event Franchisor assumes Tenant's leasehold interest in the Lease pursuant to the terms of this Agreement and subsequently assigns the Lease and its leasehold interest to a Bang Cookies franchisee approved by Landlord, Franchisor shall not be responsible for any obligations, debts, liabilities or payments arising and/or accruing under the Lease after the effective date of such assignment. Landlord agrees that any assignment of the Lease and Tenant's leasehold interests in the Lease by Tenant to Franchisor and/or assumption by Franchisor of the Lease and such leasehold interests shall not require Landlord consent and shall not require any payment of any assignment fee or similar charge or result in any increase in rent or other fees as a result of such assignment and/or assumption.
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- Landlord must provide Franchisor, at the same time that Landlord provides Tenant, with a copy of all lease amendments and assignments, and a copy of all letters and notices that Landlord sends to Tenant relating to the Lease or the Premises.
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to the 2024 Bang Cookies Franchise Disclosure Document, the 'Right of First Refusal' is a crucial element within the lease agreement rider, granting Bang Cookies, as the franchisor, the first opportunity to assume or renew the lease for a franchise location. This right becomes particularly relevant if the franchisee's agreement terminates, expires without renewal, or if the franchisee defaults on the lease terms.
Specifically, if a Bang Cookies franchisee's agreement ends, Bang Cookies has the option, but not the obligation, to take over the lease. This includes the right to sublease the premises to another Bang Cookies franchisee. If Bang Cookies exercises this option, it will not be obligated to pay the landlord more than two months of past due rent, real estate taxes, and common area maintenance charges. Furthermore, if Bang Cookies assumes the lease and subsequently assigns it to another approved franchisee, Bang Cookies will not be responsible for any obligations arising after the assignment date.
This provision ensures that Bang Cookies maintains control over the location of its franchises, preventing potential competitors from occupying a former Bang Cookies site. It also facilitates the smooth transition of a location to a new franchisee, should the original franchisee leave the system. The landlord also agrees that the assignment of the lease from the tenant to Bang Cookies does not require landlord consent, payment of assignment fees, or increased rent or fees.
Moreover, the lease agreement rider stipulates that the tenant (franchisee) cannot transfer, sublease, or assign their interests in the lease without the prior written consent of Bang Cookies. If the landlord is inclined to approve a transfer requested by the tenant, that approval must be conditioned upon the tenant obtaining written consent from Bang Cookies. This ensures that Bang Cookies retains significant control over who operates a franchise at a specific location and protects the brand's interests.