Does Bor Restoration consider a transfer resulting from insolvency to be a 'Transfer'?
Bor_Restoration Franchise · 2024 FDDAnswer from 2024 FDD Document
indirect assignment, sale, gift, or other disposition by you (or by any of your equity owners) of any interest in (i) this Franchise Agreement or your rights under it; or (ii) your equity ownership as stated in Exhibit 1 that results in a Change of Control; or (iii) any assets of the Business (other than in the normal course of business). A "Transfer" also includes (iv) a transfer as a gift to any Person; (v) a transfer resulting from a divorce, insolvency, or business-entity dissolution proceeding; (vi) by operation of law; (vii) in the event of the death, transfer or disposition by will or under the laws of intestate succession; (viii) by the declaration of or transfer in trust; (ix) the pledge of any of interests described in this paragraph as a security interest; (ix) as the result of any merger, stock redemption, consolidation, reorganization, recapitalization or other transfer of control of you; and, (xi) by any other direct or indirect means.
- d. If a Proposed Transfer is only among existing natural-person franchisees, existing shareholders, equity holders, or members of a corporate or limited liability company franchisee, or among existing partners of a partnership franchisee, and if there is no Change of Control, then there will be no Transfer Fee, and we will not be entitled to exercise our "Right of First Refusal" which is described below. We may require the Transferee to sign a guaranty if they have not already done so. All other conditions to the approval of a Proposed Transfer will, however, apply. If the Proposed Transfer under this subsection could result in a Change in Control, then all of our rights apply, and such Transfer will be subject to our approval
- e. Each certificate of a corporate or limited-liability-business-entity franchisee will have endorsed upon its face a legend stating that assignment or transfer thereof is subject to the restrictions of this Franchise Agreement.
Source: Item 23 — Receipts (FDD pages 40–202)
What This Means (2024 FDD)
According to Bor Restoration's 2024 Franchise Disclosure Document, a transfer resulting from insolvency is considered a 'Transfer.' The document specifies that a 'Transfer' includes transfers resulting from insolvency proceedings. This definition is important for prospective franchisees to understand, as any transfer of the franchise, whether voluntary or involuntary, is subject to certain conditions and may require the franchisor's approval.
Furthermore, the FDD also defines 'Involuntary Transfer,' which includes any transfer not approved by Bor Restoration. This definition specifically encompasses the transfer or assignment of any interest in the Franchise Agreement or the franchisee's business entity as a result of insolvency or bankruptcy proceedings. This distinction highlights that even transfers occurring due to financial distress are subject to the franchisor's scrutiny and control.
For a potential Bor Restoration franchisee, this means that if the business becomes insolvent and a transfer of the franchise occurs as a result, it will be considered both a 'Transfer' and an 'Involuntary Transfer.' Bor Restoration has the right to oversee and potentially disapprove such transfers. This could have significant implications for the franchisee's ability to manage their business and potentially exit the franchise agreement in the event of financial difficulties. Franchisees should carefully consider these terms and seek legal counsel to fully understand their rights and obligations in such situations.