Can Baya Bar withhold consent for a transfer in its sole discretion?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
ement with Developer in reliance on Franchisor's perceptions of the individual and collective character, skill, aptitude, attitude, business ability, and financial capacity of Developer. Thus, no transfer, as hereafter defined, may be made without Franchisor's prior written approval. Franchisor may void any transfer made without such approval.
- 6.3 Transfers by Developer. Developer shall not directly or indirectly sell, assign, transfer, give, devise, convey or encumber this Agreement or any right granted or interest herein or hereunder (a "Transfer") or suffer or permit any such assignment, transfer, or encumbrance to occur by operation of law unless Developer first obtains the written consent of Franchisor, which Franchisor may or may not grant in Franchisor's sole discretion, and subject to the following:
- 6.3.1 The proposed transferee must be an individual of good moral character and otherwise meet Franchisor's then-applicable standards for multi-unit franchisees.
- 6.3.2 The transferee must have sufficient business experience, aptitude and financial resources to operate multiple Baya Bar outlets and to comply with this Agreement;
- 6.3.3 The transferee has agreed to complete Franchisor's Initial Management Training Program to Franchisor's satisfaction;
- 6.3.4 Developer has paid all amounts owed to (i) Franchisor pursuant to this Agreement and all Franchise Agreements and other agreements between Franchisor and/or Franchisor's affiliates and Developer and (ii) third-party creditors;
- 6.3.5 The transferee has executed Franchisor's then-standard form of Multi-Unit Development Agreement, which may have terms and conditions different from this Agreement, for a term no less than the unexpired term of future development obligations due pursuant to the Mandatory Development Schedule of this Agreement;
- 6.3.6 Developer agrees to subordinate any claims Developer may have against the transferee to Franchisor and indemnify Franchisor against any claims by the transferee relating to misrepresentations in the transfer process, specifically excluding those representations made by Franchisor in the Franchise Disclosure Document given to the transferee;
- 6.3.7 Franchisor has granted written approval of the material terms and conditions of the Transfer, including, without limitation, that the price and terms of payment will not adversely affect the transferee's development obligations. However, Franchisor's approval of a Transfer is not in any way a representation or warranty of the transferee's success or the soundness of transferee's decision to purchase the Developer's development rights on such terms and conditions.
Source: Item 23 — RECEIPTS (FDD pages 56–189)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, Baya Bar has the authority to approve or deny a transfer of the franchise. The document states that no transfer may occur without Baya Bar's prior written approval, which Baya Bar may or may not grant at its discretion. This means that even if a franchisee finds a suitable buyer, Baya Bar can still prevent the sale.
Several conditions must be met for a transfer to be considered. The potential buyer must meet Baya Bar's standards for multi-unit franchisees, possess sufficient business experience and financial resources, and complete the initial management training program. Additionally, the franchisee must have paid all outstanding amounts owed to Baya Bar and third-party creditors. These requirements ensure that any new franchisee is well-qualified and financially stable.
If a franchisee wants to transfer their Baya Bar franchise, they must provide all proposed transfer documents to Baya Bar for review at least 30 days before the planned transfer. As a condition of the transfer, the franchisee must pay Baya Bar a transfer fee. The standard transfer fee is 50% of the then-current initial franchise fee. However, the transfer fee is 25% of the then-current initial franchise fee if the transfer is to an existing Baya Bar area developer or franchisee in good standing. The transfer fee is $2,000 for transfers among the individuals named as Developer in the introductory paragraph of the agreement. For a transfer to a spouse, parent, or child upon death or permanent disability of the Developer, the transfer fee is $2,500.
Baya Bar also retains the right of first refusal, allowing them to purchase the franchise on the same terms as any other potential buyer. This provision gives Baya Bar significant control over who enters the franchise system. The ability to withhold consent, coupled with the right of first refusal, gives Baya Bar broad authority over franchise transfers, which could impact a franchisee's ability to sell their business when and to whom they choose.