Does C3 Wellness Spa have a right of first refusal to acquire a franchisee's business?
C3_Wellness_Spa Franchise · 2024 FDDAnswer from 2024 FDD Document
| l. | Franchisor's approval of transfer | 14.B. | Transfers require our prior written consent, which may be |
|---|---|---|---|
| by franchisee | granted or withheld in our discretion. | ||
| m. | Conditions for franchisor's approval of transfer | 14.C. | For approval of your transfer, you must provide us with 30 days prior written notice of the proposed transfer; you and your Owners must not have defaulted in your obligations under the Franchise Agreement and all other agreements with us; you and your Owners must be in compliance with your obligations under the Franchise Agreement and all other agreements with us; the transferee must agree to be bound by all of the terms and provisions of the Franchise Agreement; the transferee's owners and their spouses must personally guarantee all of the terms and provisions of the Franchise Agreement; you and your Owners and their spouses must sign a general release in favor of us; the transfer must provide for the assignment and/or ownership of the approved location for the Franchised Business, and the transferees continued use and occupancy of such location throughout the term of the Franchise Agreement; the assets of the Franchised Business must be transferred to the transferee; the transferee and the transferee's owners and managers, at the transferee's expense must complete our training programs; we waive our right of first refusal; and we approve of the transfer and transferee in writing and subject to our discretion; and you pay the Transfer Fee (subject to applicable state laws). |
| n. | Franchisor's right of first refusal to acquire franchisee's business | 14.F. | We have the right to match any offer to purchase your Spa Location Franchise or the Corporate Entity operating your Spa Location Franchise. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 43–50)
What This Means (2024 FDD)
According to C3 Wellness Spa's 2024 Franchise Disclosure Document, C3 Wellness Spa does have a right of first refusal. Specifically, C3 Wellness Spa has the right to match any offer a franchisee receives to purchase their Spa Location Franchise or the corporate entity operating the Spa Location Franchise.
This right of first refusal means that if a C3 Wellness Spa franchisee receives an offer from a third party to buy their franchise, they must first give C3 Wellness Spa the opportunity to purchase the franchise on the same terms. This allows C3 Wellness Spa to maintain control over its franchise locations and potentially expand its corporate-owned operations.
For a prospective franchisee, this condition could impact their exit strategy. While they are free to find a buyer for their franchise, C3 Wellness Spa has the ultimate say in who the franchise is sold to. If C3 Wellness Spa exercises its right of first refusal, the franchisee will be obligated to sell the franchise to C3 Wellness Spa instead of the third-party buyer. Franchisees should consider this when projecting potential sale prices and negotiating terms with potential buyers, as C3 Wellness Spa could step in and match the offer.