If a franchisee obtains financing, does Burros Fries have any approval rights over the terms?

According to Burros Fries's 2024 Franchise Disclosure Document, when a franchisee seeks to transfer ownership, Burros Fries retains certain approval rights related to the transferee's debt. Specifically, the franchisee must provide Burros Fries with copies of the draft Asset Purchase Agreement or Ownership Purchase Agreement, along with any draft Promissory Notes and Security Agreements, regardless of whether the financing is franchisee-financed or lender-financed.

Burros Fries explicitly reserves the right to reject the proposed purchase if, in their opinion, the potential new owner is taking on too much debt. This clause gives Burros Fries significant control over who can become a franchisee and ensures that new owners are financially stable, which can protect the brand's reputation and reduce the risk of franchise failure.

This requirement applies not only to traditional lender financing but also to situations where the franchisee provides the financing themselves. By requiring these documents, Burros Fries aims to assess the financial viability of the proposed transfer and mitigate risks associated with a heavily indebted franchisee. Prospective franchisees should be aware that any transfer of ownership is subject to Burros Fries's financial scrutiny and approval.