Can the Franchisor unreasonably withhold approval of an assignee for a Buns On Fire franchise?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
- (viii.) Assignee, transferee, or purchaser shall, prior to any such assignment, pay to Franchisor a non-refundable transfer fee equal to fifty percent (50%) of the then-current Initial Franchise Fee to reimburse Franchisor for its legal and accounting fees, credit investigation, training expenses, and other charges and expenses in connection with such assignment, transfer or sale; and
- (ix.) Franchisee shall enter into an agreement with the Franchisor agreeing to subordinate such assignee's, transferee's or purchaser's obligations to the Franchisor, including, without limitation, any Royalty Fees and Advertising Fees, and any obligations of such assignee, transferee or purchaser to make installment payments of the purchase price to Franchisee.
20.5 Franchisor's Right to Transfer
- (i.) Franchisor shall have the right, without the need for Franchisee's consent, to assign, transfer or sell its rights under this Agreement to any person, partnership, corporation or other legal entity provided that the transferee agrees in writing to assume all obligations undertaken by Franchisor herein and Franchisee receives a statement from both Franchisor and its transferee to that effect.
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
According to Buns On Fire's 2025 Franchise Disclosure Document, a franchisee needs to get approval from the franchisor to transfer the franchise to a new owner. The FDD states that the assignee needs to pay a transfer fee equal to 50% of the then-current Initial Franchise Fee. This fee is non-refundable and is meant to cover the franchisor's costs for legal and accounting work, credit checks, training, and other expenses related to the transfer.
Additionally, the new owner (assignee) has to sign an agreement with Buns On Fire, promising that their obligations to the franchisor come first. This includes making sure that any Royalty Fees, Advertising Fees, and installment payments are prioritized to the franchisor before payments to the franchisee for the purchase of the franchise.
Buns On Fire also has the right to transfer its rights under the Franchise Agreement without needing the franchisee's permission. However, the company that takes over must agree in writing to fulfill all of Buns On Fire's obligations, and the franchisee must receive a statement confirming this from both Buns On Fire and the new company. The FDD does not specify the conditions under which Buns On Fire can deny the transfer of a franchise, so it is important for a prospective franchisee to ask the franchisor directly about the specific criteria used to evaluate potential assignees and whether there are any limitations on the franchisor's ability to withhold consent.