Does the Cd One Price Cleaners franchisee need approval to transfer the franchise agreement?
Cd_One_Price_Cleaners Franchise · 2025 FDDAnswer from 2025 FDD Document
Developer and its owners acknowledge that Franchisor is granting Developer the rights under this Agreement because of Franchisor's perception of Developer's (and its owners') individual and collective character, skill, business acumen, financial capability and ability to operate CD Stores according to Franchisor's standards. These rights are personal to Developer and its owners. Therefore, neither Developer nor any of its direct or indirect owners
CD DRA 2025-26 5
may transfer (as defined in the Current Franchise Agreement) this Agreement or any direct or indirect ownership interests in Developer without Franchisor's prior written approval, which Franchisor may grant or withhold for any or no reason. Franchisor may transfer this Agreement or any of Franchisor's direct or indirect ownership interests without restriction.
12.9 Right of First Refusal. If Franchisee or any of its direct or indirect owners shall at any time determine to sell an interest in this Agreement, the Store, some or all of the Operating Assets (other than in the ordinary course of business) or a direct or indirect controlling interest in Franchisee (whether in one or a series of transfers, regardless of the period of time over which these transfers take place), Franchisee or its direct or indirect owner(s) shall obtain a bona fide, arm's-length, executed purchase agreement (and any ancillary agreements) in complete and definitive form (subject to Franchisor's consent and waiver of its right of first refusal as described herein), and an earnest money deposit (in the amount of two percent (2%) or more of the purchase price) from a qualified, responsible, bona fide and fully disclosed purchaser. A true and complete copy of such purchase agreement and any proposed ancillary agreements shall immediately be submitted to Franchisor by Franchisee, such owner(s) or both. The purchase agreement (1) must apply only to an interest which is permitted to be transferred under this Agreement, (2) may not include the purchase of any other property or rights of Franchisee (or such owner(s)), and (3) must not provide for any additional payments to be made, or any increase in the amounts payable, in the event Franchisor exercises its right of first refusal hereunder. The price and terms of purchase offered to Franchisee (or such owner(s)) in the purchase agreement for the aforementioned interests shall reflect the bona fide price offered therefor and shall not reflect any value for any other property or rights.
If Franchisee is in full compliance with this Agreement, then, subject to the other provisions of this Article 12, Franchisor will not unreasonably withhold its approval of a transfer that meets all the requirements in this Section.
Franchisor will not unreasonably withhold its approval of the transfer of a non-controlling ownership interest in Franchisee (determined as of the date on which the proposed transfer will occur), or the transfer of a controlling or non-controlling ownership interest in one of Franchisee's direct or indirect owners (if such owner is a business entity) that results in the indirect transfer of a non-controlling ownership interest in Franchisee (determined as of the date on which the proposed transfer will occur), if:
- (a) the proposed transferee and its direct and indirect owners are of good moral character, have no interest in and do not perform services for a Competitive Business (as defined in Article 15), and otherwise meet Franchisor's then applicable standards for CD Store franchisees;
- (b) Franchisee pays a non-refundable transfer fee of One Thousand Dollars ($1,000) to partially cover Franchisor's costs relating to the proposed transfer; and
- (c) all new owners of any direct or indirect ownership interest in Franchisee sign Franchisor's then current form of personal guarantee pursuant to which they agree to be personally bound by, and personally liable for the breach of, all of Franchisee's obligations under this Agreement.
Source: Item 23 — Receipts (FDD pages 72–263)
What This Means (2025 FDD)
According to the 2025 Cd One Price Cleaners Franchise Disclosure Document, franchisees must obtain prior written approval from Cd One Price Cleaners to transfer the franchise agreement. Cd One Price Cleaners, as the franchisor, may grant or withhold this approval for any reason. This stipulation underscores the franchisor's control over who operates a Cd One Price Cleaners franchise and ensures that new operators meet their standards.
If a franchisee wishes to sell their interest in the agreement, the store, operating assets, or a controlling interest in the franchise, they must first obtain a bona fide purchase agreement with an earnest money deposit of at least 2% of the purchase price from a qualified purchaser. This agreement must pertain only to interests that are transferable under the franchise agreement and cannot include other property or rights of the franchisee. The franchisee must then submit a complete copy of the purchase agreement to Cd One Price Cleaners.
Cd One Price Cleaners retains the right of first refusal, meaning they have the option to purchase the franchise under the same terms offered to the third-party buyer. This provision allows Cd One Price Cleaners to maintain control over the franchise's ownership and direction. The purchase agreement must not include additional payments or increased amounts if Cd One Price Cleaners exercises its right of first refusal, ensuring a fair and transparent process.
Cd One Price Cleaners will not unreasonably withhold approval of a transfer if the franchisee is in full compliance with the agreement. However, the proposed transferee must be of good moral character, not have interests in a competitive business, and meet Cd One Price Cleaners' standards for franchisees. Additionally, the franchisee must pay a $1,000 non-refundable transfer fee, and all new owners must sign a personal guarantee to be bound by the obligations of the franchise agreement.