What happens to a Burros Fries franchise upon the death or mental incapacity of the franchisee?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
ch disposition will be subject to all the terms and conditions for transfer contained in this Agreement. If the interest is not disposed of within six (6) months, we may terminate this Agreement.
Upon the death of the Franchisee or if an Entity, an Owner who owns more than ten percent (10%) or more of the Business or in the event of any temporary or permanent mental or physical disability of such person, a manager shall be employed for the operation of the Business who has successfully completed our training courses to operate the Business on behalf of the Franchisee. If after the death or disability of the named Owner, the Business is not being managed by such trained manager, we may at our option, appoint a manager to maintain the operation of the Business until an approved transferee or manager will be able to assume the management and operation of the Business, but no such operation and management of the Business will continue for more than ninety (90) days without the approval of the personal representative of the named Owner (renewable as necessary for up to one year) and we will periodically discuss the status of the Business with the personal representative of the named Owner; such manager shall be deemed an employee of the Franchisee. All funds from the operation of the Business during the period of management by such appointed or approved manager shall be kept in a separate fund and all expenses of the Business, including compensation of such manager, other costs and travel and living expenses of such appointed or approved manager (the "Management Expenses"), shall be charged to such fund. As compensation for the management services provided, in addition to any other fees due, we shall charge such fund the full amount of the direct expenses incurred by us during such period of management for and on behalf of Franchisee, provided that we shall only have a duty to utilize reasonable efforts and shall not be liable to Franchisee, the named Owner or personal representative of the named Owner, the Entity or any person or entity having an interest therein for any debts, losses or obligations incurred by the Business, or to any creditor of Franchisee or the named Owner during any period in which it is managed by our appointed or approved manager.
Within thirty (30) days after the effective date of legal transfer of the franchise to Franchisee's heirs or successors of Franchisee's Owners, the heirs or successors must notify us in writing and make application for approval of such transfer. The application for such transfer is subject to the same conditions, procedures and costs as any other transfer except that there may be no transfer fee.
E. Transfer, Sale or Assignment to Third Party
If we do not exercise our right to purchase within thirty (30) days pursuant to Section 22.C, Franchisee may thereafter transfer, sell or assign the Interest to the proposed buyer, but not at a lower price or on more favorable terms than disclosed to us in writing. The sale is subject to our prior written approval as specified in this Agreement.
If Franchisee does not complete the sale to the proposed buyer within ninety (90) days after we notify Franchisee that we do not intend to exercise our right of first refusal (whether or not the First Notice Deadline or the Due Diligence Deadline has expired), or if there is a material change in the terms of the sale (which Franchisee must communicate promptly to us), we will have an additional right to accept the sale during the thirty (30) day period following either the expiration of that ninety (90) day period or our receipt of notice of the material change(s) in the sale's terms, either on the terms originally offered or the
modified terms, at our option.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to the 2024 Burros Fries Franchise Disclosure Document, in the event of the death or mental incapacity of a franchisee, or an owner with at least a 10% stake in the business, Burros Fries requires that a trained manager be employed to operate the business. This manager must have successfully completed Burros Fries's training courses. If such a manager is not in place, Burros Fries has the option to appoint one to maintain operations until an approved transferee or manager can take over.
This appointed or approved manager can only manage the business for a maximum of 90 days without the approval of the deceased or incapacitated owner's personal representative, although this can be renewed as necessary for up to one year. Burros Fries will also periodically discuss the business's status with the personal representative. The manager is considered an employee of the franchisee, and all funds from the business's operation during this period are kept in a separate fund. This fund covers all business expenses, including the manager's compensation, costs, and travel expenses. Burros Fries will charge this fund for the direct expenses they incur during the management period.
Furthermore, the executor, administrator, or personal representative has six months to transfer the interest in the Burros Fries business to a third party approved by Burros Fries. These transfers are subject to the same restrictions and conditions as any other transfer. If the heirs or beneficiaries cannot meet the agreement conditions, the personal representative has six months to dispose of the deceased's interest, subject to all transfer terms in the agreement. Failure to dispose of the interest within six months may result in the termination of the Franchise Agreement by Burros Fries. Franchisee heirs or successors must notify Burros Fries in writing within 30 days of the legal transfer and apply for approval, which is subject to the same conditions, procedures, and costs as any other transfer, except that there may be no transfer fee.