What constitutes 'good cause' for Bombs Away to refuse a transfer of ownership?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
- (g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause.
This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise.
Good cause shall include, but is not limited to:
(i) The failure of the proposed transferee to meet the franchisor's then-current reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
Source: Item 23 — RECEIPTS (FDD pages 36–117)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the company can refuse a transfer of ownership for 'good cause.' This includes several specific situations that are outlined in Item 23.
The first reason Bombs Away can deny a transfer is if the proposed transferee does not meet the company's current qualifications or standards. This means that anyone seeking to take over a franchise must satisfy Bombs Away's requirements for franchisees at that time. Another cause for refusal is if the proposed transferee is a competitor of Bombs Away or its subfranchisor, preventing direct rivals from acquiring existing franchises.
Additionally, Bombs Away can refuse a transfer if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations. This ensures that anyone taking over a franchise is committed to adhering to the franchise agreement. Finally, the company can refuse a transfer if either the current franchisee or the proposed transferee has outstanding payments due to Bombs Away or has failed to correct any existing defaults in the franchise agreement at the time of the proposed transfer. This protects Bombs Away from potential financial losses or unresolved contractual issues during a transfer of ownership. However, this does not prevent Bombs Away from exercising its right of first refusal to purchase the franchise.