Does the Buona Franchise Agreement allow franchisees or their owners to sell, assign, transfer, or encumber any interest in the agreement to a third party?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
written notice of the assignment so attesting, Franchisor will have no further obligation under this Agreement, and Franchisee agrees promptly to execute a general release of Franchisor and its Affiliates, from claims or liabilities of Franchisor under this Agreement.
15.2 Transfer by Franchisee. Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee, and that Franchisor has granted this Agreement in reliance on Franchisee's business skills and financial capacity. Accordingly, neither (i) Franchisee, nor (ii) any immediate or remote successor to Franchisee, nor (iii) any individual or any Entity which directly or indirectly owns any interest in Franchisee or in this Agreement, shall sell, assign, transfer, convey, donate, pledge, mortgage, or otherwise encumber any direct or indirect interest in (i) this Agreement, (ii) Franchisee, or (iii) a substantial portion of the assets of the Franchised Business without the prior written consent of Franchisor. Acceptance by Franchisor of any royalty fee, marketing fund contributions or any other amount accruing hereunder from any third party, including but not limited to any proposed transferee, shall not constitute Franchisor's approval of such party as a transferee or the transfer of this Agreement to such party. Any purported assignment or transfer, by operation of law or otherwise, not having the written consent of Franchisor, shall be null and void, and shall constitute a material breach of this Agreement, for which Franchisor may then terminate without opportunity to cure pursuant to Section 16.2(f) of this Agreement.
15.3 Conditions of Consent. Franchisor shall not unreasonably withhold its written approval of a transfer, provided Franchisee and the assignee or transferee have met all of the following conditions as determined by Franchisor in its sole discretion:
(a) Franchisee shall not be in default under this Agreement or any agreement with Franchisor and its Affiliates at the time Franchisee requests the right to transfer the franchise or at the time the Franchised Business is to actually be transferred. All accounts payable and other monetary obligations to Franchisor and its Affiliates shall be paid in full;
(b) Franchisee shall have agreed to remain obligated under the covenants contained in Article XIV hereof as if this Agreement had been terminated on the date of the transfer;
(c) The transferee must be of good moral character and reputation, in the reasonable judgment of Franchisor;
(d) Franchisor shall have determined, to its satisfaction, that the transferee's qualifications meet Franchisor's then-current criteria for new franchisees;
(e) The terms and conditions of the proposed transfer, including all financial terms of the proposed transfer, shall be provided in writing to Franchisor at least fifteen (15) business days prior to the proposed effective date of the transfer, and shall be approved in writing by Franchisor;
(f) The transferee shall execute, at Franchisor's option, (i) written assignment, in form satisfactory to Franchisor, pursuant to which the transferee shall assume all of the obligations of Franchisee under this Agreement and any other agreement relating to the Franchised Business to be transferred; or (ii) Franchisor's then-current form of dual brand Franchise Agreement and such other then-current ancillary agreements as Franchisor may reasonably require. The then-current form of the Franchise Agreement may contain new or significantly different terms, including but not limited to a higher royalty fee and advertising fund contribution and less territorial protection than contained in this Agreement. The then-current form of the Franchise Agreement will expire on the expiration date of this Agreement and will contain the same renewal rights, if any, as are available to Franchisee under this Agreement;
(g) Franchisee shall execute a general release in favor of Franchisor and its Affiliates of any claims it may have against Franchisor and its Affiliates, or their shareholders, officers, directors, members, managers, employees and agents, predecessors, successors and assigns relating to the Franchised Business, unconditionally releasing them from any and all claims Franchisee might have against Franchisor and its Affiliates, or their shareholders, officers, directors, members, managers, employees and agents, predecessors, successor and assigns, as of the date of the assignment;
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, franchisees face restrictions on transferring their interests in the Franchise Agreement. The agreement is considered personal to the franchisee, and Buona grants it based on the franchisee's business skills and financial capacity. Therefore, franchisees, their successors, or any entity owning an interest in the franchise cannot sell, assign, transfer, or encumber any direct or indirect interest in the agreement, the franchise itself, or a substantial portion of the franchised business's assets without Buona's prior written consent.
Any attempt to transfer the agreement without Buona's consent is considered a material breach and is null and void, potentially leading to termination of the agreement without an opportunity to cure the breach. However, Buona will not unreasonably withhold consent for a transfer if certain conditions are met. These conditions include the franchisee not being in default of any agreements with Buona, fulfilling all monetary obligations to Buona and its affiliates, and agreeing to remain obligated under specific covenants as if the agreement had been terminated on the transfer date. The prospective transferee must also be of good moral character and reputation, as judged reasonably by Buona.
Buona also retains the right of first refusal to acquire the franchised business on the same terms and conditions as a bona fide offer from a qualified third party. The franchisee must notify Buona in writing of any proposed transfer, including all terms and conditions, and provide copies of relevant documents. Buona then has 30 days to decide whether to acquire the interest on those terms. This right of first refusal applies to any sale, pledge, assignment, trade, or transfer of ownership interests in the franchise entity. These provisions ensure that Buona maintains control over who becomes a franchisee and protects the integrity of its brand and system.