What is the prohibited action for a Burger King franchisee regarding assigning their rights under the agreement?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
- (19) Any sale, assignment, merger or transfer of any interest of Franchisee in this Agreement in violation of Sections 3, 15 or 16 of this Agreement, and, if this Agreement has been assigned to a Corporation or a LLC, the creation, sale, assignment, or transfer of the stock of the Corporation, or membership interests in the LLC in violation of Sections 3, 15 or 16 of this Agreement.
The failure of an Heir to be approved by BKC under Section 15.C. of this Agreement, or to transfer the Franchised Restaurant to an approved Franchisee, within eighteen (18) months of the Franchisee's death or incapacity shall be in violation of Section 15 of this Agreement for purposes of this Section 18.A.(19).
If this act of default shall occur, BKC shall have the right to terminate this Agreement effective upon notice to Franchisee without opportunity to cure.
Source: Item 23 — RECEIPTS (FDD pages 127–995)
What This Means (2025 FDD)
According to Burger King's 2025 Franchise Disclosure Document, a franchisee is prohibited from any sale, assignment, merger, or transfer of any interest in the Franchise Agreement that violates Sections 3, 15, or 16 of the agreement. This also applies to the creation, sale, assignment, or transfer of stock in a corporation or membership interests in an LLC if the agreement has been assigned to such an entity, again in violation of Sections 3, 15, or 16.
This means that a Burger King franchisee cannot freely sell, assign, or transfer their franchise rights without adhering to the conditions outlined in Sections 3, 15, and 16 of the Franchise Agreement. These sections likely contain provisions related to obtaining Burger King's approval for any such transfer, ensuring that the new owner meets certain qualifications and standards. Failure to comply with these sections could result in the termination of the Franchise Agreement.
Furthermore, if the franchise is held by a corporation or LLC, the franchisee cannot create, sell, assign, or transfer the stock or membership interests in a way that violates the same sections. This provision is designed to prevent indirect transfers of control over the franchise without Burger King's consent. The FDD also specifies that failure of an heir to be approved by Burger King or to transfer the franchised restaurant to an approved franchisee within eighteen months of the franchisee's death or incapacity is a violation of Section 15.
In practical terms, a prospective Burger King franchisee needs to carefully review Sections 3, 15, and 16 of the Franchise Agreement to fully understand the restrictions on transferring their franchise rights. They should also be aware that any attempt to bypass these restrictions could lead to immediate termination of the agreement without an opportunity to correct the violation. This is a significant risk that franchisees must consider when planning for the future of their business.