Is a share exchange 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 share exchange is explicitly considered a transfer of the franchise agreement. The FDD states that the term "transfer" includes any "share exchange." This means that if a Belocal franchisee engages in a share exchange, it is treated as a transfer of the franchise agreement under the terms of the agreement.
Because a share exchange is considered a transfer, the franchisee must obtain prior written consent from Belocal. Failure to do so would constitute a material breach of the agreement, potentially leading to penalties or termination of the franchise. The franchisee is required to apply to Belocal for consent, and both the transferor and the proposed transferee must provide all information that Belocal requires to make a decision.
Belocal has the right to approve or disapprove the proposed transfer based on factors it deems relevant. These factors can include whether the franchisee is in default of the agreement. The franchisee must also pay a transfer fee, which is equal to the initial franchise fee that Belocal generally charges to new franchisees, plus reasonable attorney's fees. This ensures that Belocal maintains control over who operates a Belocal franchise and that the new operator meets their standards.
In the event of an unapproved transfer, Belocal can levy transfer damages. These damages are equal to the greater of 15% of the price paid by the transferee or $25,000. This provision underscores the importance of adhering to the transfer requirements outlined in the franchise agreement and protects Belocal's interests in maintaining the integrity and quality of its franchise system.