Under what condition can a Baya Bar franchisee transfer their interest in the franchise agreement?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
- 16.3 Transfers by Franchisee.
Franchisee shall not directly or indirectly sell, assign, transfer, give, devise, convey or encumber this Agreement or any right or interest herein or hereunder (a "Transfer"), the Franchise, the Franchised Business or any assets thereof (except in the ordinary course of business) or suffer or permit any such assignment, transfer, or encumbrance to occur by operation of law unless it first obtains the written consent of Franchisor.
16.6 Franchisor 's Right of First Refusal.
16.6.1 If Franchisee wishes to transfer all or part of its interest in the Franchised Business or this Agreement or if a Principal wishes to transfer any ownership interest in Franchisee, pursuant to any bona fide offer to purchase such interest, then Franchisee or such Principal shall promptly notify Franchisor in writing of each such offer, and shall provide such information and documentation relating to the offer as Franchisor may require.
16.6.2 Franchisor has the right, exercisable by written notice to Franchisee within thirty (30) days after receipt of written notification and copies of all documentation required by Franchisor describing such offer, to buy the interest in this Agreement and the Franchised Business or the Principal's interest in Franchisee for the price and on the terms and conditions contained in the offer, subject to Section 16.6.3.
16.6.3 Franchisee further agrees, in the event Franchisor exercises its right of first refusal, notwithstanding anything to the contrary contained in the offer, that (i) Franchisor may substitute cash for any other form of consideration contained in the offer; (ii) at Franchisor 's option, Franchisor may pay the entire purchase price at closing; (iii) Franchisor 's credit will be deemed equal to the credit of any proposed transferee; (vi) Franchisor will have at least sixty (60) days to close the purchase; and (v) Franchisor will be entitled to receive from the Franchisee all customary representations and warranties given by a seller of the assets of a business or equity interest in an entity, as applicable.
16.6.4 If Franchisor does not exercise its right to buy within thirty (30) days, Franchisee may thereafter transfer the interest to the transferee on terms no more favorable than those disclosed to Franchisor, provided that such transfer is subject to Franchisor's prior written approval pursuant to Section 16.3 hereof.
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, a franchisee cannot directly or indirectly transfer any interest in the franchise agreement without the prior written consent of Baya Bar. This includes selling, assigning, or encumbering the agreement, the franchise, the franchised business, or any of its assets. Any transfer occurring without Baya Bar's approval may be voided by Baya Bar.
Furthermore, if a franchisee wishes to transfer their interest based on a legitimate purchase offer, they must first notify Baya Bar in writing and provide all relevant information about the offer. Baya Bar then has the right of first refusal, allowing them to purchase the franchisee's interest at the same price and terms as the offer, with some adjustments. Baya Bar can substitute cash for other forms of consideration, pay the entire purchase price at closing, and has at least 60 days to close the purchase.
If Baya Bar chooses not to exercise its right of first refusal within 30 days, the franchisee may proceed with the transfer to the original transferee, but only if the terms are no more favorable than those initially disclosed to Baya Bar and if Baya Bar provides prior written approval. This ensures that Baya Bar maintains control over who becomes a franchisee and that the terms of the transfer are acceptable to them.