Can Best Brains require the original franchisee to guarantee the obligations of the transferee?
Best_Brains Franchise · 2025 FDDAnswer from 2025 FDD Document
aph and Agreement are held to be unreasonable and therefore unenforceable by any court of competent jurisdiction, then the duration, scope and/or geographic area of the foregoing restrictions and agreements shall remain in full force and effect as to such maximum duration, scope and/or geographic area as the court shall allow.
9. TRANFERABILITY OF INTEREST.
- A. Transfer by the Company. We shall have the right, in our sole discretion, to transfer or assign this Agreement and all or any part of its rights or obligations to any person or legal entity who agrees to abide by the obligations in this Agreement. You shall execute such documents consenting to such a transfer as we request.
- B. Transfer by Franchisee. You understand and acknowledge that the rights and duties set forth in this Agreement are personal to you, and that we have granted this franchise in reliance on your business skill, financial capacity, and personal character.
Accordingly, you may not sell, assign, transfer, convey, pledge, encumber, merge, or give (collectively "transfer") away any direct or indirect interest in this Agreement, in Franchisee, or in all or substantially all of the assets of the Franchised Business without our prior written consent. Any purported assignment or transfer not having our written consent shall be null and void.
We shall not unreasonably withhold its written approval of an assignment or transfer, provided:
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- You have properly offered us the opportunity to exercise the right of first refusal as provided in the right of first refusal section of this Agreement, and we declined to exercise it;
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- The assignee or transferee has sufficient business experience, aptitude, financial resources, meets our then applicable stan
Source: Item 23 — RECEIPTS (FDD pages 42–190)
What This Means (2025 FDD)
According to Best Brains' 2025 Franchise Disclosure Document, Best Brains can require the original franchisee to guarantee the obligations of the transferee under certain conditions. Specifically, if a franchisee wishes to transfer their interest in the franchise, Best Brains may request that the original franchisee enter into an agreement guaranteeing the full payment and performance of the obligations of the new transferee. This condition is one of several that Best Brains may impose before approving a transfer.
This requirement protects Best Brains by ensuring that the original franchisee remains financially responsible for the franchise's performance even after the transfer. This can be particularly important if the transferee has a weaker financial history or less experience than the original franchisee. For a prospective franchisee looking to sell their Best Brains franchise in the future, this means they could still be held liable for the financial obligations of the business even after it is sold, depending on the agreement Best Brains requires at the time of transfer.
In addition to the guarantee, Best Brains also outlines other conditions for approving a transfer, including the right of first refusal, ensuring the transferee meets their standards, payment of outstanding monetary obligations, refurbishment of the franchise location, consent from the lessor, payment of a $2,500 transfer fee, and execution of releases of claims. These conditions are typical in franchising to maintain brand standards and protect the franchisor's interests during ownership changes.