Under what conditions can Buona unreasonably withhold approval of a franchise transfer?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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;
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, Buona will not unreasonably withhold its written approval of a franchise transfer if the franchisee and the assignee or transferee meet certain conditions. These conditions, which Buona determines in its sole discretion, include the franchisee not being in default under the Franchise Agreement or any agreement with Buona and its affiliates at the time of the transfer request or the actual transfer. Additionally, all accounts payable and other monetary obligations to Buona and its affiliates must be paid in full.
The franchisee must also agree to remain obligated under the covenants contained in Article XIV of the agreement, as if the agreement had been terminated on the transfer date. Furthermore, the transferee must be of good moral character and reputation, as reasonably judged by Buona. These stipulations ensure that the transfer process maintains the integrity and financial stability of the Buona franchise system.
It is important to note that even if the franchisee and transferee meet all the listed conditions, Buona still retains some discretion in approving the transfer. However, the clause specifying that Buona will not "unreasonably withhold" approval provides some protection to the franchisee. If a franchisee believes Buona is acting unfairly despite all conditions being met, they may have grounds to negotiate or seek legal counsel. This balance aims to protect both Buona's interests in maintaining a high-quality franchise system and the franchisee's right to transfer their business under reasonable circumstances.
In the franchise industry, transfer provisions are common, as franchisors want to ensure that any new franchisee meets their standards and will uphold the brand's reputation. The specific conditions for transfer, and the extent of the franchisor's discretion, can vary widely. Prospective Buona franchisees should carefully review these transfer provisions and consider how they might affect their ability to sell their franchise in the future.