What is Bft's right of first refusal in the context of a franchise transfer?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.5 Franchisor's Right of First Refusal. If Franchisee (or any of its owners) desire to engage in a Transfer, Franchisee (or its owners) agree to obtain from a responsible and fully disclosed buyer, and send to Franchisor, a true and complete copy of a bona fide, executed written offer (which may include a letter
of intent) relating exclusively to an interest in Franchisee or in this Agreement and the Studio. The offer must include details of the payment terms of the proposed sale and the sources and terms of any financing for the proposed purchase price. To be a valid, bona fide offer, the proposed purchase price must be in a dollar amount, and the proposed buyer must submit with its offer an earnest money deposit equal to five percent (5%) or more of the offering price. The right of first refusal process will not be triggered by a proposed Transfer that would not be allowed under Sections 14.1 and 14.2 above. Franchisor may require Franchisee (or its owners) to send to Franchisor copies of any materials or information sent to the proposed buyer or transferee regarding the possible transaction.
Within 30 days after Franchisor receives an exact copy of the bona fide offer and all information that Franchisor requests, Franchisor may, by written notice delivered to Franchisee or its selling owner(s), elect to purchase the interest offered for the price and on the terms and conditions contained in the offer. Franchisor may substitute any form of payment proposed in the offer as acceptable consideration. Franchisee and its owners must make all customary representations and warranties given by the seller of the assets of a business or the ownership interests in a legal entity, as applicable, and Franchisee and its selling owner(s) (and their immediate family members) must comply with the obligations regarding Competing Businesses, as though this Agreement had expired on the date of the purchase. Franchisor has the unrestricted right to assign this right of first refusal to its affiliate or an unaffiliated third party, who then will have the rights described in this Section 14.5.
If Franchisor decides not to exercise its right of first refusal, Franchisee or its owners may complete the sale to the proposed buyer on the original offer's terms, but only if Franchisor otherwise consented to the Transfer in accordance with, and Franchisee (and its owners) and the transferee comply with the conditions in, Sections 14.1 and 14.2 above. If Franchise does not complete the sale to the proposed buyer within 60 days after either Franchisor notifies Franchisee that it does not intend to exercise its right of first refusal or the time Franchisor's exercise expires, or if there is a material change in the terms of the sale (which Franchisee agrees to tell Franchisor promptly), Franchisor or its designee will have an additional right of first refusal during the 30-day period following either the expiration of the 60-day period or Franchisor's receipt of notice of the material change(s) in the sale's terms, either on the terms originally offered or the modified terms, at Franchisor's or its designee's option.
Source: Item 23 — RECEIPTS (FDD pages 79–265)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, Bft has a right of first refusal if a franchisee wishes to transfer their interest in the franchise. To initiate this process, the franchisee must obtain a complete copy of a bona fide, executed written offer from a potential buyer, which includes the payment terms, financing details, and an earnest money deposit of at least five percent (5%) of the offering price. This offer must be sent to Bft. The right of first refusal is not triggered if the proposed transfer would not be allowed under Sections 14.1 and 14.2 of the franchise agreement. Bft may also request any materials or information shared with the potential buyer.
Within 30 days of receiving the offer and any requested information, Bft can elect to purchase the franchisee's interest at the price and terms specified in the offer by providing written notice. Bft can modify the form of payment proposed in the offer to something it deems acceptable. The franchisee must provide customary representations and warranties, and the franchisee and its owners must comply with obligations regarding competing businesses, as if the agreement had expired on the purchase date. Bft has the right to assign this right of first refusal to an affiliate or unaffiliated third party.
If Bft decides not to exercise its right of first refusal, the franchisee can proceed with the sale to the proposed buyer, provided Bft has otherwise consented to the transfer per Sections 14.1 and 14.2, and both the franchisee and the buyer comply with those sections. The sale must be completed within 60 days after Bft notifies the franchisee of its decision not to exercise its right, or after the expiration of Bft's exercise period. If the sale is not completed within this timeframe, or if there are material changes to the terms of the sale, Bft has an additional 30-day right of first refusal, either on the original or modified terms.
This right of first refusal allows Bft to maintain control over who enters its franchise system, ensuring that new franchisees meet its standards and qualifications. For a prospective franchisee, this means that selling their franchise is not a straightforward process and depends on Bft's approval and potential interest in buying the franchise back. The franchisee must adhere to specific timelines and provide all necessary information to Bft, or risk losing the sale or triggering additional rights for Bft.