What constitutes an 'unapproved transfer of Franchise responsibility' that would allow C12 Group to terminate the franchise agreement without an opportunity to cure?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
iving notice from Franchisor, Franchisor may terminate this Agreement upon notice to Franchisee.
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- Termination by Franchisor Without Opportunity to Cure. Franchisor may terminate this Agreement immediately, upon written notice to Franchisee, should any of the following occur: (i) Franchisee or any member or owner of Franchisee receiving a criminal conviction, entering a guilty plea, or entering a plea of nolo contendere with respect to any felony or crime of moral turpitude; (ii) the abandonment of the Franchised Business or sustained inability of Franchisee to productively engage in the Franchised Business; (iii) an unapproved transfer of Franchise responsibility or any ownership interest(s) in Franchisee if Franchisee is an entity; (iv) Franchisee's filing of bankruptcy or making of an assignment for the benefit of creditors; and/or (v) unrepentant behavior by Franchisee or any member or owner of Franchisee that strikes at the unity of those engaged in C12 as Area Chairs and members. In the event that the franchisee is an entity, Franchisor may also exercise its termination rights pursuant to this section in the event that any of the foregoing shall occur with respect to any owner of such entity. The provisions under this Section are subject to state and federal law.
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- Alternatives to Termination by Franchisor. Franchisor may address by other means any breach of this Agreement that has not been satisfactorily cured by Franchisee within the applicable cure period. These alternative measures include, without limitation and at Franchisor's sole discretion, the redefining of the franchise scope or Territory and/or the termination of this Agreement.
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- Franchisor's Step-in Rights and Resale. If this Agreement is terminated by Franchisor for cause, Franchisor may, in its sole discretion, choose to continue to operate the Franchised Business with a Chair or other representative designated by Franchisor, which may involve another C12 franchisee. In the event that Franchisor assumes the operation of the Franchised Business as described herein, Franchisor shall pay Franchisee fifty percent (50%) of the Net Operating Income of the Franchised Business for three (3) months (the "Step-In Payment"). The "Net Operating Income" means the Gross Revenue of the Franchised Business less (i) payment of the Royalty Fees to Franchisor that Franchisee would have paid but for the termination of this Agreement and (ii) all other expenses incurred by Franchisor while operating the Franchised Business. Franchisor may, in its sole discretion, attempt to sell the Franchised Business, but Franchisor shall have no obligation to do so. If Franchisor does not sell or otherwise decides to close the Franchised Business, there will be no compensation to Franchisee.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to C12 Group's 2025 Franchise Disclosure Document, an unapproved transfer of franchise responsibility or any ownership interest in the franchisee (if the franchisee is an entity) can result in immediate termination of the franchise agreement without an opportunity to cure the issue.
Specifically, C12 Group retains the right to approve all sales and transfers of the franchised business or any interest in the franchisee if the franchisee is an entity. A transfer is considered to have occurred when more than 50% of the equity ownership of the franchisee, as of the date of the Franchise Agreement, is sold or transferred to a third party. In such cases, the franchisee or the transferee may be required to execute C12 Group's current form of franchise agreement, which may have materially different terms.
C12 Group may also set conditions for its consent to any transfer, including evaluating the successor or transferee's qualifications and business plan, ensuring the transferee completes New Chair Training, and requiring payment of a $6,000 transfer fee. If the transferee is not an existing C12 Group franchisee, they may also have to pay a training fee. The transfer is only approved after the transferee is qualified, the $6,000 transfer fee is paid, all outstanding amounts owed by the franchisee are paid, a general release of C12 Group is executed, and a new franchise agreement is signed if more than 50% of the franchised business is transferred.
This means that a C12 Group franchisee needs to obtain approval from C12 Group before transferring any part of their franchise to another party. Failure to do so could result in the termination of their franchise agreement. This is a fairly standard clause in franchise agreements, as franchisors want to ensure that any new owners meet their standards and are properly trained.