Can Bombs Away refuse a transfer if the proposed transferee is a competitor?
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, Bombs Away can refuse a franchise transfer if the proposed transferee is a competitor. The FDD states that a franchisor can refuse a transfer of ownership for "good cause".
The FDD defines "good cause" as including several factors. One of these factors is "the fact that the proposed transferee is a competitor of the franchisor or subfranchisor." This means that Bombs Away has the right to deny a transfer to someone who directly competes with the Bombs Away brand.
This provision protects Bombs Away from having its proprietary information, business practices, and customer relationships fall into the hands of a competitor through a franchise transfer. It is a fairly standard clause in franchise agreements, designed to maintain brand integrity and competitive advantage.