Is a Beard Papas franchisee personally liable for all monetary obligations to Beard Papas under the terms of the Franchise Agreement?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
ansfer, the transferee, at its expense, must improve, modify, refurbish, renovate, remodel, and/or otherwise upgrade Franchisee's Beard Papa's Shop Facility to conform to the then current standards and specifications of Franchisor, and the transferee must complete such improvements, modifications, refurbishments, renovations, remodeling, and/or upgrading within the time period Franchisor reasonably specifies;
- (9) Franchisee, each Owner, and each Spouse shall remain liable for all obligations to Franchisor set forth in this Agreement, except that, following a Transfer that fully complies with this Article 14.C., Franchisee, each Owner, and each Spouse shall not be obligated to pay any Royalty Fees and Advertising Contributions which accrue following the date of the approved Transfer;
- (10) At the transferee's expense, the transferee, and the transferee's Managing Owner, managers
and/or any other applicable employees of transferee's Beard Papa's Shop must complete any training programs then in effect for franchisees of Beard Papa's Shops upon terms and conditions set forth in this Agreement or as Franchisor otherwise reasonably requires;
- (11) Franchisee must pay the Transfer Fee to Franchisor, which is a fixed sum of $15,000 (the "Transfer Fee");
- (12) Franchisor's approval of the material terms and conditions of the Transfer, and Franchisor determines in Franchisor's Reasonable Business Judgment that the price and terms of payment are not so burdensome as to be detrimental to the future operations of the Franchised Business by the transferee;
- (13) Transferee's employees, directors, officers, independent contractors, and agents who will have access to Confidential Information shall execute the Confidentiality Agreement attached hereto as Exhibit 2;
- (14) Franchisee entering into an agreement with Franchisor agreeing to subordinate any obligations of transferee to make installment payments of the purchase price to Franchisee to the transferee's obligations to Franchisor, including, without limitation, transferee's obligations with respect to Royalty Fees and Advertising Contributions;
- (15) Franchisee and transferee acknowledge and agree that Franchisor's approval of the Transfer indicates only that the transferee meets, or Franchisor waived, the criteria established by Franchisor for franchisees as of the time of such transfer, and Franchisor's approval thereof does not constitute a warranty or guaranty by Franchisor, express or implied, of the suitability of the terms of sale, successful operation, or profitability of the Franchised Business;
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
Based on the 2025 Beard Papas Franchise Disclosure Document, in the event of a transfer of the franchise, the original franchisee, its owners, and their spouses typically remain liable for all obligations to Beard Papas as outlined in the Franchise Agreement. However, there is an exception: following a transfer that fully complies with the outlined requirements, the franchisee, its owners, and their spouses will no longer be obligated to pay any Royalty Fees and Advertising Contributions that accrue after the date the transfer is approved. This indicates that while initial obligations are generally upheld, future financial responsibilities can be absolved under specific conditions of a fully compliant transfer.
This condition is further reinforced by the requirement that any transferee must also assume all obligations of the franchisee in a manner satisfactory to Beard Papas. This assumption is secured by requiring each owner of the transferee, along with their spouses, to personally execute an Owner and Spouse Agreement and Guaranty. This mechanism ensures that Beard Papas has recourse to the personal assets of the new ownership to cover any financial or operational shortfalls, maintaining the financial integrity of the franchise system.
In the context of franchise transfers, Beard Papas also mandates that the franchisee entering into an agreement with them must subordinate any obligations of the transferee to make installment payments of the purchase price to the franchisee. This subordination includes the transferee's obligations regarding Royalty Fees and Advertising Contributions. This requirement prioritizes Beard Papas' financial interests over those of the outgoing franchisee, ensuring that ongoing fees are paid promptly and fully, which is a common practice in franchising to protect the brand's revenue stream.
Furthermore, the transferee may be required to execute the then-current standard form Franchise Agreement offered to new franchisees, which would supersede the original agreement. While the terms may differ, the new agreement must provide for the same Royalty Fee, Advertising Contributions, and all other financial or monetary obligations established in the original agreement. This ensures that the financial obligations remain consistent, regardless of the agreement's version, safeguarding Beard Papas' financial interests and standardizing financial terms across all franchisees.