Regarding the acquisition of a Burros Fries franchise, are there any third-party consents required other than those of the franchisee and franchisor?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
In addition, the Franchisee must submit copies of the draft Asset Purchase Agreement or Ownership Purchase Agreement, all draft Promissory Notes, and Security Agreements, with the transferee, regardless of whether they are Franchisee financed or lender financed. In addition to all other grounds for rejection, we have the right to reject any proposed purchase of the assets of the Franchised Business or any type of ownership interest in the Franchisee or Franchised Business on the grounds that the proposed transferee has, in our sole opinion, taken on too much debt.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to Burros Fries's 2024 Franchise Disclosure Document, when transferring a franchise, the franchisee must submit copies of the draft Asset Purchase Agreement or Ownership Purchase Agreement, along with all draft Promissory Notes and Security Agreements, to Burros Fries. This submission is required regardless of whether the financing is franchisee-financed or lender-financed.
Burros Fries retains the right to reject any proposed purchase of the assets of the franchised business or any type of ownership interest in the franchisee or franchised business if, in their opinion, the proposed transferee has taken on too much debt. This indicates that while the franchisee and franchisor are primary parties in the transfer agreement, the franchisor's approval is contingent upon their assessment of the transferee's financial stability.
This requirement ensures that potential new owners are financially sound, which protects the Burros Fries brand and the interests of other franchisees. A prospective franchisee should clarify with Burros Fries what specific financial ratios or debt levels would trigger a rejection, to better understand the criteria used in this evaluation process.