To what extent does the Transferee assume liability for the Buns On Fire Franchise Agreement?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
and any purported assignment, mortgage, pledge or encumbrance thereof, without the prior written consent of Franchisor, shall be null and void. The issuance or transfer of any stock (including by way of any public
stock offering), membership interest(s) or partnership interest(s) in Franchisee, or its merger, a consolidation or dissolution, if the Franchisee is a corporation, limited liability company or a partnership, shall be deemed an assignment of this Agreement and of the franchise granted herein.
20.2 Transfer to a Corporate Entity
If Franchisee is an individual, Franchisor hereby consents, upon thirty (30) days' prior written notice, to the assignment by Franchisee of all of the Franchisee's rights and benefits under this Agreement to a corporation or limited liability company of which Franchisee owns at least a majority of the voting and equity stock or membership interests, provided that:
- (i.) Such entity is newly organized, and its activities and corporate purposes are confined exclusively to acting as a Buns on Fire franchise under this Agreement;
- (ii.) Such entity and all stockholders or members thereof execute a Transfer of Franchise to a Corporation or Limited Liability Company form, or such other form as shall be provided or approved by Franchisor, in which they jointly and severally assume all of the past and future obligations of Franchisee under this Agreement, to the same extent as if they had originally executed this Agreement as Franchisee;
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
According to the 2025 Buns On Fire Franchise Disclosure Document, when a franchisee transfers their rights to a corporation or limited liability company they control, the transferee assumes significant liability. Specifically, if the franchisee is an individual and wants to assign their rights to a corporation or LLC where they own a majority stake, the new entity must agree to assume all past and future obligations under the Franchise Agreement. This assumption of obligations is to the same extent as if the entity had originally signed the agreement.
Furthermore, the original franchisee isn't entirely off the hook. The franchisee (or their designated manager) must actively manage the entity and dedicate their full time and effort to the Buns On Fire franchise. The franchisee also remains personally liable for all obligations, including payments for products, jointly with the entity and its stockholders or members. This ensures that Buns On Fire retains recourse to the original franchisee's assets and expertise even after the transfer.
To ensure transparency, the certificates of the new entity must bear a legend indicating that the transfer is subject to the terms and conditions of the Franchise Agreement with SMYA Ventures LLC. This informs any potential future investors or owners of the entity about the existing franchise obligations. This requirement helps protect Buns On Fire's interests by ensuring that all parties are aware of the franchise agreement's terms.