How does Beauty Bungalows define 'transfer' of the franchise by the franchisee?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
| H | “Cause” defined - non- curable defaults | Section 13.02(b) | Non-curable defaults include misrepresentation by you, failure to complete initial training, bankruptcy, insolvency, or appointment of receiver, abandonment, trademark misuses, unauthorized disclosure, unapproved transfers, or repeated noncompliance. (Termination upon bankruptcy may not be enforceable under U.S. Bankruptcy Law.) |
|---|---|---|---|
| I | Franchisee’s obligations on termination/nonrenewal | Sections 3.07, 13.03, 13.04 | Obligations include complete de- identification, non-competition, return of confidential or critical business information, payment of amounts due, and, upon Franchisor’s election, cooperation regarding assignment of lease. |
| J | Assignment of contract by franchisor | Section 14 | No restriction on our right to assign. |
| K | “Transfer” by franchisee - defined | Sections 1.23, 14.03 | Includes transfer of contract or assets or ownership change. |
| L | Franchisor approval of transfer by franchisee | Sections 14.04-14.08 | We have the right to approve all transfers but will not unreasonably withhold approval. |
| M | Conditions for franchisor approval of transfer | Section 14.04 | Franchise must be open for business to the general public at the Premises, New Franchisee qualifies, Transfer Fee paid, purchase agreement approved, training arranged, general release signed by you, and current agreement signed by new Franchisee. Any brokers’ fees or commissions that arise because of the transfer must be paid by the Franchisee. |
| N | Franchisor’s right of first refusal to acquire franchisee’s Business. | Section 14.09 | We can match any offer for your Business. |
| O | Franchisor’s option to purchase franchisee’s Business | Section 14.09 | We may purchase the Business pursuant to our Right of First Refusal to match any offer for your Business. |
| P | Death or disability of franchisee | Section 14.08 | Franchise must be assigned by estate to approved transferee within 120 days. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 36–40)
What This Means (2025 FDD)
According to Beauty Bungalows's 2025 Franchise Disclosure Document, a 'transfer' by the franchisee includes the transfer of the franchise contract, its assets, or any change in ownership. This definition is found in Sections 1.23 and 14.03 of the franchise agreement. This broad definition means that any significant change in who controls or benefits from the franchise is considered a transfer, requiring franchisor approval.
Beauty Bungalows retains the right to approve all transfers, but states that it will not unreasonably withhold approval. However, the FDD also outlines specific conditions that must be met for a transfer to be approved. These conditions include that the franchise must be open for business, the new franchisee must meet Beauty Bungalows's qualifications, a transfer fee must be paid, the purchase agreement must be approved, training must be arranged for the new franchisee, the current franchisee must sign a general release, and the new franchisee must sign the current franchise agreement. Additionally, any broker fees or commissions resulting from the transfer are the responsibility of the franchisee.
Beauty Bungalows also has a right of first refusal, allowing it to match any offer made for the franchisee's business. This means that before a franchisee can sell to a third party, Beauty Bungalows has the option to purchase the business on the same terms. This provision gives Beauty Bungalows significant control over who becomes a franchisee within their system and ensures they can maintain brand standards and consistency. In the event of the franchisee's death or disability, the franchise must be assigned to an approved transferee within 120 days.
For multi-unit developers, the definition of 'transfer' is slightly different. It includes the transfer of the Development Agreement itself, any interest in the Development Agreement, or any interest in the business entity if the franchisee is a business entity. Beauty Bungalows has the right to approve or disapprove all transfers in its sole discretion when it comes to the Development Agreement. They also have the first right of refusal on all transfers, which can be exercised within 30 days of receiving an executed copy of the contract of transfer. These terms are described in Section 7 of the Development Agreement.