Under what circumstances can Bombs Away refuse to permit a transfer of ownership of a franchise?
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 the 2024 Bombs Away Franchise Disclosure Document, Bombs Away can refuse a transfer of ownership of a franchise for "good cause." This is a fairly standard clause in franchise agreements, intended to protect the integrity and standards of the franchise system. Bombs Away retains the right of first refusal to purchase the franchise.
Good cause includes several specific scenarios. First, Bombs Away can refuse a transfer if the proposed transferee does not meet the franchisor's current reasonable qualifications or standards. This ensures that any new franchisee will be capable of operating the business according to Bombs Away's established methods. Second, if the proposed transferee is a competitor of Bombs Away, the transfer can be denied, preventing potential conflicts of interest and protecting Bombs Away's competitive advantage.
Additionally, Bombs Away can refuse the transfer if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations. This ensures that the new franchisee is committed to adhering to the franchise agreement and all applicable laws. Finally, if either the current franchisee or the proposed transferee has any 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, Bombs Away can deny the transfer. This protects Bombs Away's financial interests and ensures that all obligations are met before a transfer occurs.