Under what conditions can the Black Bear Diner franchisor withhold consent for a transfer?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
- 7.2.1 If Developer is a corporation, limited liability company, partnership, or limited liability partnership, each principal of Developer with at least a ten percent (10%) equity ownership interest in Developer ("Principal"), and the interest of each Principal in Developer, is identified in Exhibit C hereto.
Developer represents and warrants that its owners are as set forth on Exhibit C attached to this Agreement, and covenants that it will not permit the identity of such owners, or their respective interests in Developer, to change without complying with this Agreement.
Franchisor shall have the right to designate any person or entity which owns a direct or indirect interest in Developer as a Principal, and Exhibit C shall be so amended automatically upon notice thereof to Developer.
Throughout the term of this Agreement, Franchisor shall have a continuing right to designate as a Principal any person or entity that owns a direct or indirect interest in Developer.
- 7.2.2 This Agreement has been entered into by Franchisor in reliance upon and in consideration of the individual or collective character, reputation, skill, attitude, business ability, and financial capacity of Developer or, if applicable, its Principals who will actively and substantially participate in the development, ownership and operation of the Black Bear Diner restaurants.
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to the 2025 Black Bear Diner Franchise Disclosure Document, the franchisor can withhold consent for a transfer of the Development Agreement if the developer seeks to change the identity or interests of its owners without complying with the agreement. Specifically, if the developer is a corporation, LLC, partnership, or LLP, the principals with at least a 10% equity ownership interest must be identified in Exhibit C of the agreement, and the developer must not change the identity or interests of these owners without adhering to the agreement's stipulations. The franchisor also has the right to designate any person or entity with a direct or indirect interest in the developer as a principal, which would automatically amend Exhibit C upon notice to the developer.
Black Bear Diner enters into the Development Agreement based on the character, reputation, skills, attitude, business ability, and financial capacity of the developer or its principals. These factors are critical to the success of the Black Bear Diner restaurants. Therefore, maintaining the originally approved ownership and management structure is essential for the franchisor.
For a prospective franchisee, this means that any changes in ownership or equity structure must be carefully managed and disclosed to Black Bear Diner. Failure to comply with these requirements could result in the franchisor withholding consent for a transfer, potentially jeopardizing the development agreement. It is crucial to maintain open communication with the franchisor regarding any changes in ownership or management to ensure compliance with the agreement and avoid any disruptions to the development plans.