Is a merger considered a transfer of the Belocal franchise agreement?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, a merger is explicitly considered a transfer of the franchise agreement. The FDD states that the term "transfer" includes any "merger, consolidation share exchange, or transfer by operation of law or otherwise, whether direct or indirect, voluntary or involuntary." Additionally, any ownership or structural changes in the franchisee, including any merger, will be deemed a transfer.
This means that if a Belocal franchisee undergoes a merger, it is treated as if the franchise agreement is being transferred to a new entity. Consequently, the franchisee must obtain Belocal's prior written consent for the merger to proceed. Failure to do so would constitute a material breach of the franchise agreement, potentially leading to termination of the agreement.
Furthermore, the franchisee will likely need to submit information to Belocal for approval of the transfer, and Belocal has the right to approve or disapprove the transfer based on various factors. The franchisee may also be required to pay a transfer fee, which could be equal to the then-current initial franchise fee for new franchisees, plus legal fees. This is a fairly standard clause in franchise agreements, as franchisors want to maintain control over who operates their franchises and ensure that any new entity meets their standards.