Under what circumstances can a Brain Balance franchisee be relieved of their obligations after a sale, assignment, transfer, conveyance, encumbrance, or gift of an interest in the agreement?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
16.06.
The Franchise granted by COMPANY pursuant to this Agreement is personal in nature.
FRANCHISEE shall remain at all times personally responsible for the performance of all obligations required to be performed by FRANCHISEE pursuant to this Agreement.
No sale, assignment, transfer, conveyance, encumbrance, or gift of an interest in this Agreement, or in a Franchise granted hereby, shall relieve FRANCHISEE, its members, shareholders, or partners from the obligations of FRANCHISEE hereunder except with the express written agreement to the contrary of COMPANY, which will not be unreasonably withheld as to all obligations arising from and after a sale, assignment, transfer, conveyance, encumbrance, or gift to an unrelated third party other than those that apply following termination or expiration of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 70–72)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, a franchisee is generally not relieved of their obligations under the franchise agreement following a sale, assignment, transfer, conveyance, encumbrance, or gift of an interest in the agreement. However, there is an exception: Brain Balance may provide express written agreement to the contrary, which the company states it will not unreasonably withhold. This release applies only to obligations arising from and after the transfer to an unrelated third party, excluding obligations that persist after the agreement's termination or expiration.
To secure Brain Balance's approval for a sale, several conditions must be met. The entire interest of the franchisee must be transferred. Unless the buyer is already a Brain Balance franchisee, they must complete the initial training program at their own expense. The buyer must also meet Brain Balance's standards for new franchisees and demonstrate the ability to operate the business. The buyer needs to execute a new 10-year franchise agreement (without paying an additional initial franchise fee) and any other required documents. The franchisee must pay Brain Balance a $10,000 transfer fee, all outstanding dues, and the transferee must pay a $2,500 software agreement transfer fee.
Additionally, the franchisee must not retain a security interest in the franchise and must ensure that any financial agreements between the franchisee and the purchaser are subordinate to the purchaser's obligations to Brain Balance. These conditions ensure that Brain Balance maintains control over who operates its franchises and that all financial obligations to the company are prioritized during and after the transfer process. The personal nature of the franchise agreement underscores the ongoing responsibility of the franchisee unless explicitly released by Brain Balance in writing.