Under what conditions can Chocolate Fish Coffee refuse a transfer of ownership of a franchise?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
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ARTICLE 15. TRANSFERS
- 15.1 By Chocolate Fish Franchising. Chocolate Fish Franchising may transfer or assign this Agreement, or any of its rights or obligations under this Agreement, to any person or entity, and Chocolate Fish Franchising may undergo a change in ownership and/or control, without the consent of Franchisee.
- 15.2 By Franchisee. Franchisee acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Chocolate Fish Franchising entered into this Agreement in reliance on Franchisee's business skill, financial capacity, personal character, experience, and business ability. Accordingly, Franchisee shall not conduct or undergo a Transfer without providing Chocolate Fish Franchising at least 60 days prior notice of the proposed Transfer, and without obtaining Chocolate Fish Franchising's consent. In granting any such consent, Chocolate Fish Franchising may impose conditions, including, without limitation, the following:
- (i) Chocolate Fish Franchising receives a transfer fee equal to $10,000 plus any broker fees and other out-of-pocket costs incurred by Chocolate Fish Franchising;
- (ii) the proposed assignee and its owners have completed Chocolate Fish Franchising's franchise application processes, meet Chocolate Fish Franchising's then-applicable standards for new franchisees, and have been approved by Chocolate Fish Franchising as franchisees;
- (iii) the proposed assignee is not a Competitor;
- (iv) the proposed assignee executes Chocolate Fish Franchising's then-current form of franchise agreement and any related documents, which form may contain materially different provisions than this Agreement (provided, however, that the proposed assignee will not be required to pay an initial franchise fee);
- (v) all owners of the proposed assignee provide a guaranty in accordance with Section 2.5;
- (vi) Franchisee has paid all monetary obligations to Chocolate Fish Franchising and its affiliates, and to any lessor, vendor, supplier, or lender to the Business, and Franchisee is not otherwise in default or breach of this Agreement or of any other obligation owed to Chocolate Fish Franchising or its affiliates;
Source: Item 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, the franchisor acknowledges that the rights and duties set forth in the franchise agreement are personal to the franchisee and that Chocolate Fish Coffee entered into the agreement based on the franchisee's business skill, financial capacity, personal character, experience, and business ability. Therefore, the franchisee cannot undergo a transfer without providing Chocolate Fish Coffee at least 60 days prior notice and obtaining their consent.
Chocolate Fish Coffee may impose conditions when granting consent to a transfer. These conditions include receiving a transfer fee of $10,000 plus any broker fees and other out-of-pocket costs. Additionally, the proposed assignee and its owners and employees may be required to undergo training. The franchisee, its owners, and the transferee and its owners must execute a general release of Chocolate Fish Coffee in a form satisfactory to them. Finally, the business must fully comply with all of Chocolate Fish Coffee's most recent System Standards.
Chocolate Fish Coffee also has a right of first refusal before a franchisee engages in a transfer, except under specific conditions such as a transfer for convenience of ownership, to a co-owner, or to a spouse, sibling, or child of an owner. The franchisee must provide Chocolate Fish Coffee with a copy of the terms and conditions of any transfer, giving Chocolate Fish Coffee the option to purchase the assets subject to the proposed transfer for the same price and terms. Chocolate Fish Coffee may substitute cash for any other form of payment.