Is a mortgage 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.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, a mortgage is explicitly considered a transfer of the franchise agreement. Belocal requires franchisees to obtain prior written consent from the franchisor before any transfer or assignment of the agreement can occur. This requirement ensures that Belocal maintains control over who operates its franchises and protects the brand's integrity.
The FDD defines "transfer" broadly, including not only sales and assignments but also any "pledge, mortgage or any other encumbrance." This means that if a Belocal franchisee seeks to mortgage their franchise, it is legally considered a transfer requiring franchisor approval. Any transfer without this prior consent is deemed a material breach of the franchise agreement, which could lead to penalties or termination of the agreement.
This provision is significant for prospective Belocal franchisees because it restricts their ability to use the franchise as collateral for financing without the franchisor's explicit permission. Franchisees need to be aware that obtaining a mortgage on their Belocal franchise necessitates navigating the transfer approval process, which may involve providing detailed information to Belocal and incurring legal or transfer fees. This requirement is not uncommon in franchising, as franchisors typically want to oversee any changes in ownership or control that could affect the franchise's operation and reputation.