Does Chocolate Fish Coffee have a right of first refusal to purchase the assets of a franchise?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
after death or incapacity. Such transfer must comply with Section 15.2.
- 15.5 Chocolate Fish Franchising's Right of First Refusal. Before Franchisee (or any Owner) engages in a Transfer (except under Section 15.3, to a co-Owner, or to a spouse, sibling, or child of an Owner), Chocolate Fish Franchising will have a right of first refusal, as set forth in this Section. Franchisee (or its Owners) shall provide to Chocolate Fish Franchising a copy of the terms and conditions of any Transfer. For a period of 30 days from the date of Chocolate Fish Franchising's receipt of such copy, Chocolate Fish Franchising will have the right, exercisable by notice to Franchisee, to purchase the assets subject of the proposed Transfer for the same price and on the same terms and conditions (except that Chocolate Fish Franchising may substitute cash for any other form of payment). If Chocolate Fish Franchising does not exercise its right of first refusal, Franchisee may proceed with the Transfer, subject to the other terms and conditions of this Article.
- 15.6 No Sublicense. Franchisee has no right to sublicense the Marks or any of Franchisee's rights under this Agreement.
15.7 No Lien on Agreement. Franchisee shall not grant a security interest in this Agreement to any person or entity. If Franchisee grants an "all assets" security interest to any lender or other secured party, Franchisee shall cause the secured party to expressly exempt this Agreement from the security interest.
**ARTICLE 16.
Source: Item 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to the 2024 Chocolate Fish Coffee Franchise Disclosure Document, Chocolate Fish Coffee has a right of first refusal regarding the transfer of a franchise. If a franchisee intends to transfer their franchise, they must provide Chocolate Fish Franchising with a copy of the terms and conditions of the proposed transfer.
Chocolate Fish Franchising then has 30 days from the date of receipt to exercise its right to purchase the assets under the same terms and conditions as the proposed transfer, with the option to substitute cash for any other form of payment. If Chocolate Fish Coffee does not exercise this right within the 30-day period, the franchisee is free to proceed with the transfer, provided they meet all other requirements outlined in the franchise agreement.
Additionally, Chocolate Fish Coffee has a purchase option when the franchise agreement expires or is terminated. Chocolate Fish Coffee has the right, but not the obligation, to purchase any or all of the assets related to the business and/or require the franchisee to assign its lease or sublease to Chocolate Fish Coffee. To exercise this option, Chocolate Fish Coffee must notify the franchisee no later than 30 days after the agreement expires or is terminated. The purchase price will be the lower of the book value of the assets as declared on the franchisee's last filed tax returns or the fair market value of the assets. If the parties cannot agree on fair market value within 30 days after the exercise notice, an independent appraiser, reasonably acceptable to both parties, will determine the fair market value, with the cost of the appraisal shared equally.