What statement regarding transfer restrictions must be included on stock or member certificates for a Baya Bar franchise entity?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
A transfer of any stock in the Franchisee if it is a corporation or a transfer of any ownership rights in Franchisee if it is a partnership, a limited liability company or limited partnership shall be considered a Transfer restricted hereunder.
If Franchisee has complied fully with this Agreement and subject to Franchisor's Right of First Refusal set forth in Section 16.6, Franchisor will not unreasonably withhold its consent of a Transfer that meets the following requirements:
16.3.1 The proposed transferee and all its principals must have the demeanor and be individuals of good character and otherwise meet Franchisor's thenapplicable standards for franchisees.
16.3.2 The transferee must have sufficient business experience, aptitude and financial resources to operate the Franchised Business and to comply with this Agreement;
16.3.3 The transferee has agreed to complete Franchisor's Initial Management Training Program to Franchisor's satisfaction;
16.3.4 Franchisee has paid all amounts owed to Franchisor and third-party creditors;
16.3.5 The transferee has executed Franchisor's then-standard form of Franchise Agreement, which may have terms and conditions different from this Agreement, except that the transferee shall not be required to pay the Initial Franchise Fee;
16.3.6 Franchisee and the transferee and each of Franchisee's and the transferee's Principals shall have executed a general release under seal, in a form satisfactory to Franchisor, of any and all claims against Franchisor and Franchisor's officers, directors, shareholders, members and employees in their corporate and individual capacities, including, without limitation, claims arising under federal, state and local laws, rules and ordinances.
Franchisee will agree to subordinate any claims Franchisee may have against the transferee to Franchisor, and indemnify Franchisor against all claims brought against Franchisor by the transferee for a period of three (3) years following the transfer;
- 16.3.7 Franchisor has granted written approval of the material terms and conditions of the Transfer, including, without limitation, that the price and terms of
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
The 2024 Baya Bar Franchise Disclosure Document states that a transfer of any stock in a corporate franchisee or any ownership rights in a franchisee that is a partnership, limited liability company, or limited partnership is considered a restricted transfer. This means that if a Baya Bar franchisee operates their business through one of these business structures, any change in ownership (stock transfer, membership interest transfer, etc.) is subject to the franchisor's approval and the transfer restrictions outlined in the franchise agreement.
This restriction is in place because Baya Bar has made the Franchise Agreement with the franchisee in reliance on their individual and collective character, skill, aptitude, attitude, business ability, and financial capacity. Therefore, any change in ownership could potentially impact the operation and management of the franchise, and Baya Bar wants to ensure that any new owners meet their standards.
To transfer ownership, the franchisee must obtain Baya Bar's prior written approval, and any transfer made without this approval may be voided. The proposed transferee must meet Baya Bar's standards for franchisees, have sufficient business experience and financial resources, and agree to complete the initial management training program. Additionally, the franchisee must have paid all amounts owed to Baya Bar and third-party creditors, and both the franchisee and transferee must execute a general release of claims against Baya Bar. The transferee must also execute Baya Bar's then-standard form of Franchise Agreement, which may have different terms and conditions.
In summary, this transfer restriction is a standard provision in franchise agreements that allows Baya Bar to maintain control over who operates its franchises and to ensure that all franchisees meet its standards. Prospective franchisees should carefully review the transfer provisions in the Franchise Agreement to understand the requirements and restrictions involved in transferring ownership of their franchise.