Can Buona transfer its interest in the Franchise Agreement to another entity?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
- 15.1 Transfer by Franchisor**.** This Agreement shall inure to the benefit of the successors and assigns of Franchisor. Franchisor shall have the right to transfer or assign its interest in this Agreement to any person, persons or Entity. If Franchisor's assignee assumes all the obligations of Franchisor hereunder and sends Franchisee 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) the then-current form of Buona 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.
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, Buona has the right to transfer or assign its interest in the Franchise Agreement to any person or entity. If the assignee assumes all of Buona's obligations under the agreement and provides written notice to the franchisee attesting to this, Buona will have no further obligation under the agreement. In this case, the franchisee agrees to promptly execute a general release of Buona and its affiliates from any claims or liabilities. This clause ensures Buona maintains flexibility in its business operations and potential restructuring.
Conversely, the franchisee's ability to transfer the agreement is significantly restricted. The FDD states that the franchisee's rights and duties are personal, and Buona has granted the agreement based on the franchisee's skills and financial capacity. Therefore, the franchisee, or any successor or entity with an interest in the franchise, cannot sell, assign, transfer, convey, donate, pledge, mortgage, or encumber any direct or indirect interest in the agreement, the franchise, or a substantial portion of the franchised business's assets without Buona's prior written consent.
Any transfer without Buona's written consent is considered null and void and constitutes a material breach of the agreement, potentially leading to termination without an opportunity to cure. However, Buona will not unreasonably withhold approval of a transfer if the franchisee and the assignee meet certain conditions. These conditions include the franchisee not being in default, agreeing to remain obligated under non-compete covenants, and the transferee being of good moral character and meeting Buona's current criteria for new franchisees. The financial terms of the transfer must be disclosed to Buona at least fifteen business days prior to the proposed effective date and be approved in writing. The transferee may also be required to execute Buona's then-current franchise agreement, which may contain different terms, including higher fees and less territorial protection.