Following the death or incapacity of a Bombs Away franchisee, can the business be transferred to another existing owner?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
e entity's charter documents, by-laws (or operating agreement) and similar documents, if requested by Bombs Away Franchising, (3) Franchisee owns all voting securities of the
corporation or limited liability company, and (4) Franchisee provides a guaranty in accordance with Section 2.5.
- 15.4 Transfer upon Death or Incapacity. Upon the death or incapacity of Franchisee (or, if Franchisee is an entity, the Owner with the largest ownership interest in Franchisee), the executor, administrator, or personal representative of that person must Transfer the Business to a third party approved by Bombs Away Franchising (or to another person who was an Owner at the time of death or incapacity of the largest Owner) within nine months after death or incapacity. Such transfer must comply with Section 15.2.
- 15.5 Bombs Away Franchising's Right of First Refusal. Before Franchisee (or any Owner) engages in a Transfer (except under Section 15.3, or to a co-Owner, or to a spouse, sibling, or child of an Owner), Bombs Away Franchising will have a right of first refusal, as set forth in this Section. Franchisee (or its Owners) shall provide to Bombs Away Franchising a copy of the terms and conditions of any Transfer. For a period of 30 days from the date of Bombs Away Franchising's receipt of such copy, Bombs Away Franchising will have the right, exercisable by notice to Franchisee, to purchase the assets subject of the proposed Transfer for the same price and on the same terms and conditions(except that Bombs Away Franchising may substitute cash for any other form of payment). If Bombs Away Franchising does not exercise its right of first refusal, Franchisee may proceed with the Transfer, subject to the other terms and conditions of this Article.
- 15.6 No Sublicense. Franchisee has no right to sublicense the Marks or any of Franchisee's rights under this Agreement.
- 15.7 No Lien on Agreement. Franchisee shall not grant a security interest in this Agreement to any person or entity. If Franchisee grants an "all assets" security interest to any lender or other secured party, Franchisee shall cause the secured party to expressly exempt this Agreement from the security interest.
ARTICLE 16. INDEMNITY
- 16.1 Indemnity. Franchisee shall indemnify and defend (with counsel reasonably acceptable to Bombs Away Franchising) Bombs Away Franchising, its parent entities, subsidiaries and affiliates, and their respective owners, directors, officers, employees, agents, successors and assignees (collectively, "Indemnitees") against all Losses in any Action by or against Bombs Away Franchising and/or any Indemnitee directly or indirectly related to, or alleged to arise out of, the operation of the Business. Notwithstanding the foregoing, Franchisee shall not be obligated to indemnify an Indemnitee from Actions arising as a result of any Indemnitee's intentional misconduct or negligence. Any delay or failure by an Indemnitee to notify Franchisee of an Action shall not relieve Franchisee of its indemnity obligation except to the extent (if any) that such delay or failure materially prejudices Franchisee. Franchisee shall not settle an Action without the consent of the Indemnitee. This indemnity will continue in effect after this Agreement ends.
- 16.2 Assumption. An Indemnitee may elect to assume the defense of any Action subject to this indemnification and control all aspects of defending the Action (including negotiations and settlement), at Franchisee's expense. Such an undertaking shall not diminish Franchisee's obligation to indemnify the Indemnitees.
**ARTICLE 17.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to the 2024 Bombs Away Franchise Disclosure Document, in the event of the death or incapacity of a franchisee, or the owner with the largest ownership interest if the franchisee is an entity, the business must be transferred within nine months. The transfer can be to a third party approved by Bombs Away Franchising or to another person who was an owner at the time of the death or incapacity of the largest owner. This transfer is subject to the conditions outlined in Section 15.2 of the franchise agreement.
Section 15.2 stipulates that Bombs Away Franchising must receive at least 60 days' prior notice of the proposed transfer and grant its consent. Bombs Away Franchising may impose conditions such as receiving a transfer fee of $7,500 plus broker fees and out-of-pocket costs, ensuring the proposed assignee meets the standards for new franchisees and is not a competitor, requiring the assignee to execute the current franchise agreement (though without an initial franchise fee), and ensuring all owners of the assignee provide a guaranty as per Section 2.5.
Additional conditions include the proposed assignee and their personnel undergoing required training, the execution of a general release of Bombs Away Franchising by all relevant parties, and ensuring the business fully complies with Bombs Away's most recent System Standards. Bombs Away Franchising also retains a right of first refusal, allowing it to purchase the assets of the business under the same terms offered to the proposed transferee, except that Bombs Away Franchising can substitute cash for any other form of payment.
These provisions ensure that Bombs Away maintains control over who operates a franchise within its system, even in unforeseen circumstances like death or incapacity. The existing owner or their estate must act swiftly to find a suitable buyer or transfer the business to a qualified existing owner, subject to Bombs Away's approval and conditions.