Under what circumstances does Bombs Away Franchising NOT have a right of first refusal for a transfer?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
nistrator, 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.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, Bombs Away Franchising has a right of first refusal before a franchisee engages in a transfer of their franchise. However, there are some exceptions to this rule. Bombs Away Franchising does not have a right of first refusal in the event of a transfer under Section 15.3, to a co-owner, or to a spouse, sibling, or child of an owner.
Section 15.3 refers to a transfer for convenience of ownership. If the franchisee is an individual, they may transfer the agreement to a corporation or limited liability company formed for the convenience of ownership after at least 15 days' notice to Bombs Away Franchising. This is permitted if the transferee provides the information required by Section 2.3, the franchisee provides copies of the entity's charter documents, by-laws (or operating agreement) and similar documents if requested by Bombs Away Franchising, the franchisee owns all voting securities of the corporation or limited liability company, and the franchisee provides a guaranty in accordance with Section 2.5.
This means that a Bombs Away franchisee has some flexibility in transferring ownership within their immediate family or to a business entity they control without Bombs Away Franchising being able to step in and purchase the franchise themselves. However, any other type of transfer will trigger Bombs Away Franchising's right of first refusal, allowing them to purchase the franchise under the same terms offered by a third party.