Under what conditions is a Burger King franchisee prohibited from transferring their rights or obligations under the franchise agreement?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
A. Transfer by Franchisee
- (1) Except with the prior written consent of an authorized officer of BKC as provided in Section 15.F below, Franchisee shall not (a) directly or indirectly sell, assign, convey, give away, or otherwise transfer its rights or obligations under this Agreement, or delegate any of its duties hereunder, (b) sell, assign, transfer, convey or give away substantially all of the assets of the Franchised Restaurant, or (c) sell, assign, transfer, convey or give away or otherwise grant or deliver any additional equity interests in the Franchisee.
- (2) No holder of shares of stock or other equity interests in the Franchisee, in any Owner or in any Managing Owner shall directly or indirectly sell, assign, convey, give away, mortgage, pledge, hypothecate, or otherwise transfer or encumber any legal or beneficial interest in such stock or equity interest without the prior written consent of BKC.
- (3) Except as provided in Section 15.D below, Franchisee shall not directly or indirectly mortgage, pledge, hypothecate, give as collateral for an obligation, or otherwise encumber its rights or obligations under this Agreement.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 109–124)
What This Means (2025 FDD)
According to Burger King's 2025 Franchise Disclosure Document, a franchisee faces specific limitations regarding the transfer of their rights and obligations under the franchise agreement. Except under conditions approved by Burger King, a franchisee cannot directly or indirectly sell, assign, convey, give away, or otherwise transfer their rights or obligations. This also applies to delegating any duties related to the agreement.
The restrictions extend to the assets of the franchised restaurant. A franchisee cannot sell, assign, transfer, convey, or give away substantially all of the restaurant's assets without prior authorization. Similarly, they cannot sell, assign, transfer, convey, give away, or grant additional equity interests in the franchise.
Furthermore, shareholders or equity holders in the franchisee, owner, or managing owner are prohibited from directly or indirectly selling, assigning, conveying, giving away, mortgaging, pledging, hypothecating, or otherwise transferring or encumbering any legal or beneficial interest in their stock or equity without Burger King's prior written consent. The franchisee is also restricted from mortgaging, pledging, hypothecating, or using their rights or obligations under the agreement as collateral for an obligation, unless it falls under specific exceptions outlined in another section (Section 15.D) of the agreement.