Does Chem Dry have any restrictions on assigning its contract?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in | Summary |
|---|---|---|
| j. Assignment of contract | Section 13A of the | No restriction on CDI's right to assign |
| by us | Franchise | |
| Agreement | ||
| and the Business Note | ||
| k. "Transfer" by you – | Section 13B of the | Includes transfer of equity, the Franchise |
| definition | Franchise Agreement, | Agreement or the Business assets |
| Section | ||
| 5 | ||
| of | ||
| Equipment Agreement | ||
| and Section 18 of the | ||
| Software | ||
| License | ||
| Agreement | ||
| l. CDI's approval of | Section 13B | We have the right to approve all |
| transfer by you | transfers, | |
| our | ||
| consent | ||
| not | ||
| to | ||
| be | ||
| unreasonably withheld | ||
| m. Conditions for CDI's approval of transfer | Section 13C | Transferee qualifies, transferee assumes all obligations, all amounts due are paid |
| in full, transferee has no interest in | ||
| competitive | ||
| business, | ||
| transferee | ||
| satisfactorily | ||
| completes | ||
| training, | ||
| transferee signs then current franchise | ||
| agreement | ||
| and | ||
| related | ||
| documents, | ||
| transfer fee paid, release signed (if law | ||
| allows), you subordinate amounts due to | ||
| you correct any deficiencies and | ||
| make any requested updates, you abide | ||
| by covenant not to compete, transferee | ||
| purchases all required equipment, and | ||
| you de-identify |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 51–55)
What This Means (2024 FDD)
According to Chem-Dry's 2024 Franchise Disclosure Document, Chem-Dry itself, referred to as CDI, faces no restrictions on assigning its rights to the franchise agreement. However, a franchisee's ability to transfer the franchise is subject to certain conditions and requires Chem-Dry's approval.
The FDD specifies that a "transfer" by the franchisee includes not only the transfer of the Franchise Agreement itself but also the transfer of equity in the franchise or the business assets. Chem-Dry retains the right to approve all such transfers, and this approval will not be unreasonably withheld.
To gain Chem-Dry's approval for a transfer, several conditions must be met. The potential transferee must meet Chem-Dry's qualifications, agree to assume all of the existing obligations under the franchise agreement, and pay all outstanding amounts due to Chem-Dry. Additionally, the transferee cannot have an interest in any competitive business, must satisfactorily complete Chem-Dry's training program, and must sign the then-current franchise agreement and related documents. A transfer fee must be paid, and a release signed (if legally permissible). The franchisee must also subordinate any amounts due to them, correct any deficiencies, make requested updates, abide by the covenant not to compete, and ensure the transferee purchases all required equipment and de-identifies themselves.