Does Chesters have the right to withhold consent for a transfer by a Chesters franchisee?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in franchise or other agreement | Summary | |
|---|---|---|---|
| d. | Termination by franchisee | Not Applicable | You have no contractual right to terminate the Agreement. However, you have the right to terminate the Agreement on any grounds available under applicable state law. |
| e. | Termination by franchisor without cause | Not Applicable | We have no right to terminate your Agreement without cause. |
| f. | Termination by franchisor with cause | 18 and 19 of Agreement | We have right to terminate only if you breach the Agreement. |
| g. | "Cause" defined – curable defaults | 19 of Agreement | You generally have 20 days to cure all defaults that by their nature can be cured. |
| h. | "Cause" defined – non-curable defaults | 11, 18, and 19 of Agreement | Unapproved transfers and third failed in- Restaurant inspection are not curable defaults. |
| i. | Franchisee's obligations on termination/ non-renewal | 20 of Agreement | Obligations include cease operating Restaurant and representing yourself as present or former franchisee; cease using confidential information, Marks, and trade dress; complete de-identification; and payment of amounts due. Also see (r) below. |
| j. | Assignment of contract by franchisor | 18 of Agreement | No restriction on our right to assign; we have the right to assign without your approval. |
| k. | "Transfer" by franchisee – defined | 18 of Agreement | Includes transfer of Agreement, your controlling ownership interest, and your actual management control. |
| 1. | Franchisor approval of transfer by franchisee | 18 of Agreement | You have no right to transfer without our prior written consent, which we have the right to grant or withhold as we deem best. |
| m. | Conditions for franchisor approval of transfer | 18 of Agreement | The Agreement does not specify any transfer conditions you must satisfy; we have the right to grant or withhold approval of a proposed transfer as we deem best. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 35–38)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, Chesters franchisees do not have the right to transfer their franchise without prior written consent from Chesters. Chesters retains the right to grant or withhold this approval as it deems best. This condition is detailed in Section 18 of the franchise agreement.
This means that if a franchisee wishes to sell their Chesters business or transfer controlling ownership, they must first obtain Chesters's permission. Chesters has broad discretion in making this decision, as the agreement does not specify particular conditions that Chesters must consider or adhere to when evaluating a proposed transfer.
For a prospective franchisee, this underscores the importance of understanding Chesters's criteria for approving transfers. While the FDD indicates that no specific conditions are outlined, it would be prudent to discuss potential transfer scenarios with Chesters during the due diligence phase. Understanding Chesters's perspective on what constitutes an acceptable transferee can help a franchisee plan for the future and avoid potential roadblocks if they later decide to sell their franchise.
This level of control over franchise transfers is relatively common in the franchise industry, as franchisors seek to maintain brand standards and ensure that new operators are well-qualified. However, the lack of specific, written criteria in the Chesters agreement gives Chesters significant latitude in its decisions.