What constitutes a violation of transfer restrictions by a Better Blend franchisee, leading to a non-curable default?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in franchise | Summary | |
|---|---|---|---|
| h. “Cause” defined--non- | FA: Misrepresentation when applying to be a | ||
| curable defaults | franchisee; knowingly submitting false | ||
| information; bankruptcy; fail to open by | |||
| specified deadline; lose possession of your | |||
| location; violation of law; violation of | |||
| confidentiality; violation of non-compete; | |||
| violation of ethics and values; violation of | |||
| transfer restrictions; slander or libel of us; | |||
| refusal to cooperate with our business | |||
| inspection; cease operations; operate in a | |||
| manner dangerous to health or safety (if not | |||
| corrected within 48 hours); score below 90/A | |||
| on government health inspections more than | |||
| twice in 36 months; score below passing grade | |||
| on brand inspection more than twice in 36 | |||
| months; three defaults in 12 months; cross- | |||
| termination; | |||
| a felony, or commission or accusation of an act | |||
| that is reasonably likely to materially and | |||
| unfavorably affect our brand; any other breach | |||
| Provision | Section in franchise | Summary | |
| --- | --- | --- | |
| k. “Transfer” by | FA: Article 1 | For you (or any owner of your business) to | |
| franchisee - defined | voluntarily or involuntarily transfer, sell, or | ||
| MUDA: Background | dispose of, in any single or series of transactions, (i) substantially all of the assets of the business, (ii) the franchise agreement, (iii) any direct or indirect ownership interest in the business, or (iv) control of the business. | ||
| Provision | Section in franchise | Summary | |
| --- | --- | --- | |
| l. Franchisor’s approval of | FA: § 15.2 | No transfers without our approval. No transfers without our approval. | |
| transfer by franchisee | MUDA: § 7 | ||
| Provision | Section in franchise | Summary | |
| --- | --- | --- | |
| m. Conditions for | FA: § 15.2 | Pay transfer fee; buyer meets our standards; | |
| franchisor’s approval of | |||
| transfer | |||
| MUDA: none | buyer is not a competitor of ours; buyer and its owners sign our then-current franchise agreement and related documents (including personal guaranty); you’ve made all payments to us and are in compliance with all contractual requirements; buyer completes training program; you sign a general release (subject to state law); business complies with then-current system specifications (including remodel, if applicable). |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 34–38)
What This Means (2024 FDD)
According to Better Blend's 2024 Franchise Disclosure Document, violating transfer restrictions is considered a non-curable default, which can lead to the termination of the franchise agreement. A "transfer" occurs when a franchisee (or any owner of the business) voluntarily or involuntarily transfers, sells, or disposes of, in a single transaction or a series of transactions, substantially all of the assets of the business, the franchise agreement itself, any direct or indirect ownership interest in the business, or control of the business.
This means that a Better Blend franchisee cannot transfer ownership or control of their franchise without the franchisor's approval. Better Blend defines 'transfer' broadly, covering not just direct sales of the business but also any transaction that shifts control or a significant portion of the assets. This provision is designed to ensure that Better Blend maintains control over who operates its franchises and that any new operators meet their standards.
Better Blend requires its approval for any transfer. The conditions for approval include paying a transfer fee, ensuring the buyer meets Better Blend's standards and is not a competitor, having the buyer sign the current franchise agreement and related documents (including a personal guaranty), ensuring the buyer completes the training program, confirming the franchisee has made all payments and is in compliance with all contractual requirements, requiring the franchisee to sign a general release, and ensuring the business complies with the current system specifications, including any required remodeling.
Failure to comply with these transfer restrictions gives Better Blend grounds to terminate the franchise agreement without an opportunity for the franchisee to correct the violation. This underscores the importance of franchisees understanding and adhering to the transfer requirements outlined in the franchise agreement to avoid potentially losing their franchise.