What actions are considered a violation of Section 9 of the Belocal franchise agreement regarding transfer of interest?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
- B.
By Franchisee.
Franchisee shall not transfer or assign this Agreement without Franchisor's prior written consent.
Any purported assignment or transfer, by operation of law or otherwise, made in violation of this Agreement shall be null and void and shall constitute a material breach under this Agreement.
For purposes of this Agreement, the term "transfer" shall mean any issuance, sale, assignment, gift, pledge, mortgage or any other encumbrance, transfer by bankruptcy, transfer by judicial order, merger, consolidation share exchange, or transfer by operation of law or otherwise, whether direct or indirect, voluntary or involuntary.
Any ownership or structural changes in Franchisee (including but not limited to, any merger; reorganization; transfer of shares, stock, or interests among owners; or issuance of additional shares or classes of stock or additional partnership interests) shall constitute and be deemed a transfer.
If Franchisee wishes to transfer all or part of its interest in the Franchised Business or this Agreement or in substantially all of the assets of the Franchised Business, or if Franchisee or any Principal wishes to transfer any ownership interest in Franchisee, transferor and the proposed transferee must apply to Franchisor for its consent.
Franchisee agrees to submit to Franchisor all information Franchisor may require in order to determine whether to approve a proposed transfer of the Franchised Business, and Franchisor agrees to notify Franchisee of its approval or disapproval within a reasonable period of time, not to exceed 30 days, after Franchisor has received all requested information relating to any proposed transfer of the Franchised Business.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, several actions can be considered a violation of Section 9 of the franchise agreement, which pertains to transfer and assignment. Specifically, the franchise agreement states that the franchisee cannot transfer or assign the agreement without Belocal's prior written consent. Any attempt to do so, whether by law or otherwise, is considered a breach of the agreement and will be voided.
The term "transfer" is broadly defined to include any issuance, sale, assignment, gift, pledge, mortgage, or any other encumbrance. It also covers transfers resulting from bankruptcy, judicial orders, mergers, consolidations, share exchanges, or any other operation of law, whether direct or indirect, voluntary or involuntary. Furthermore, any changes in the ownership or structure of the franchisee, such as mergers, reorganizations, transfers of shares or stock among owners, or the issuance of additional shares or partnership interests, are also considered transfers.
If a Belocal franchisee wishes to transfer any interest in the franchised business, the agreement, or substantially all of the assets of the business, they must apply to Belocal for consent. Both the transferor and the proposed transferee must provide all information requested by Belocal to assess the proposed transfer. Belocal has a reasonable period, not exceeding 30 days after receiving all necessary information, to notify the franchisee of its decision. Failure to adhere to these procedures constitutes a violation of Section 9 and can lead to termination of the franchise agreement.