Can Bombs Away Franchising deny a transfer of ownership?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
Bombs Away Franchising.** Bombs Away Franchising may transfer or assign this Agreement, or any of its rights or obligations under this Agreement, to any person or entity, and Bombs Away Franchising may undergo a change in ownership and/or control, without the consent of Franchisee.
- 15.2 By Franchisee. Franchisee acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Bombs Away Franchising entered into this Agreement in reliance on Franchisee's business skill, financial capacity, personal character, experience, and business ability. Accordingly, Franchisee shall not conduct or undergo a Transfer without providing Bombs Away Franchising at least 60 days prior notice of the proposed Transfer, and without obtaining Bombs Away Franchising's consent. In granting any such consent, Bombs Away Franchising may impose conditions, including, without limitation, the following:
- (i) Bombs Away Franchising receives a transfer fee equal to $7,500 plus any broker fees and other out-of-pocket costs incurred by Bombs Away Franchising;
- (ii) the proposed assignee and its owners have completed Bombs Away Franchising's franchise application processes, meet Bombs Away Franchising's then-applicable standards for new franchisees, and have been approved by Bombs Away Franchising as franchisees;
- (iii) the proposed assignee is not a Competitor;
- (iv) the proposed assignee executes Bombs Away Franchising's then-current form of franchise agreement and any related documents, which form may contain materially different provisions than this Agreement (provided, however, that the proposed assignee will not be required to pay an initial franchise fee);
- (v) all owners of the proposed assignee provide a guaranty in accordance with Section 2.5;
- (vi) Franchisee has paid all monetary obligations to Bombs Away Franchising and its affiliates, and to any lessor, vendor, supplier, or lender to the Business, and Franchisee is not otherwise in default or breach of this Agreement or of any other obligation owed to Bombs Away Franchising or its affiliates;
- (vii) the proposed assignee and its owners and employees undergo such training as Bombs Away Franchising may require;
- (viii) Franchisee, its Owners, and the transferee and its owners execute a general release of Bombs Away Franchising in a form satisfactory to Bombs Away Franchising; and
- (ix) the Business fully complies with all of Bombs Away Franchising's most recent System Standards.
- 15.3 Transfer for Convenience of Ownership. If Franchisee is an individual, Franchisee may Transfer this Agreement to a corporation or limited liability company formed for the convenience of ownership after at least 15 days' notice to Bombs Away Franchising, if, prior to the Transfer: (1) the transferee provides the information required by Section 2.3; (2) Franchisee provides copies of the 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.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, franchisees cannot transfer ownership without the franchisor's consent. Bombs Away requires at least 60 days' prior notice before a proposed transfer. Bombs Away may impose conditions when granting consent.
These conditions include receiving a transfer fee of $7,500 plus any broker fees and out-of-pocket costs. The proposed assignee must complete Bombs Away's franchise application process, meet the standards for new franchisees, and be approved by Bombs Away. The assignee must not be a competitor and must execute Bombs Away's current franchise agreement, though they won't have to pay an initial franchise fee. All owners of the proposed assignee must provide a guaranty, and the franchisee must have paid all monetary obligations to Bombs Away and its affiliates, as well as to any lessor, vendor, supplier, or lender to the business, and not be in default or breach of any agreement.
The proposed assignee, its owners, and employees must undergo any required training. The franchisee, its owners, and the transferee and its owners must execute a general release of Bombs Away in a satisfactory form. The business must also fully comply with Bombs Away's most recent System Standards. Bombs Away also has a right of first refusal, allowing them to purchase the assets of the proposed transfer for the same price and terms, except they can substitute cash for other forms of payment. These stipulations are typical in franchising, as the franchisor seeks to maintain brand standards and ensure the financial stability of its franchisees.