Can the then-current Burros Fries franchise agreement materially alter the rights or obligations of the transferee?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
The transferee, at its expense, shall upgrade the Business to conform to our then-current standards and specifications of the System and shall complete the upgrading and other requirements within the time specified by us;
Franchisee shall remain liable for all of the obligations to us in connection with the Franchise Business it incurred prior to the effective date of the transfer and shall execute any and all instruments reasonably requested by us to evidence such liability;
Franchisee must obtain and submit satisfactory evidence of transfer or consent of lenders, lessors and governmental authorities for all material permits, approvals and licenses;
Franchisee may transfer up to twenty percent (20%) of its shares or other ownership interests to any person or entity, in the aggregate, without invoking this provision, provided that in connection with any such transfer of more than ten percent (10%) ownership the transferee executes the same Guarantee and other agreements which would be required upon execution of this Agreement by Franchisee, if such transferee had then been the owner of such percentage of Franchisee's shares or other ownership interests.
Franchisee's transfer of an ownership interest without complying with the foregoing, or transfers of more than twenty percent (20%) ownership in the Franchisee's entity, in one or more transfers, without our prior written approval is a material breach of this Agreement;
The transferee shall agree to a sublease or to a transfer and assignment, and assumption of the lease of the Business from the original Franchisee and shall obtain the landlord's approval if required prior to any transfer or sublease, if applicable;
The transfer must be completed in compliance with the terms of any applicable leases and other agreements and with all applicable laws, including but not limited to licensing and operations-related laws and/or laws governing franchise sales;
Franchisee agrees that we may (but are not required to) discuss with Franchisee and/or the proposed transferee any matters related to any transfer at any time which we consider to be appropriate in our Business Judgment without liability (including our opinion of the terms of sale, performance of the Franchise, etc.).
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to the 2024 Burros Fries Franchise Disclosure Document, the rights and obligations of a transferee can be materially altered by the then-current franchise agreement. Specifically, the transferee must upgrade the business to meet Burros Fries's current standards and specifications within a timeframe specified by them. This ensures that all franchise locations adhere to the brand's current image and operational guidelines.
Furthermore, the original franchisee remains liable for all obligations incurred before the transfer's effective date and must provide evidence of transfer consents from lenders, lessors, and governmental authorities. The franchisee can transfer up to 20% of ownership without triggering these provisions, but transfers exceeding 10% require the transferee to execute the same guarantee and agreements as if they were the original owner. Transfers of more than 20% ownership without prior written approval from Burros Fries constitute a material breach of the agreement.
The transferee must also agree to a sublease or a transfer and assignment of the lease, securing the landlord's approval if necessary. The transfer must comply with all applicable leases, agreements, and laws, including licensing and operational regulations. Burros Fries retains the right to discuss any transfer-related matters with both the franchisee and the proposed transferee, without incurring liability, and can offer opinions on the terms of sale or franchise performance. These stipulations ensure that Burros Fries maintains control over its brand standards and the financial stability of its franchisees, while also protecting its interests in the event of a transfer.