Under what conditions will Chop5 Salad Kitchen approve a transfer of the Area Development Agreement?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
of their costs and expenses in defending such Claim,
including court costs and reasonable attorneys' fees, within 10 days of receipt of an invoice itemizing such costs and expenses.
8. TRANSFERS
- 8.1. By Us. This Agreement is fully assignable by us, without prior notice to you, and shall inure to the benefit of any assignee(s) or other legal successor(s) to our interest in this Agreement, provided that we shall, subsequent to any such assignment, remain liable for the performance of our obligations under this Agreement up to the effective date of the assignment.
- 8.2. By You. The rights and duties created by this Agreement are personal to you and the Owners. We are granting you area development rights in reliance upon the character, skill, attitude, business ability and financial resources of you and your Owners. Because this Agreement is a personal services contract, neither you nor any Owner may engage in a Transfer (other than a Permitted Transfer) without our prior written approval. Any Transfer (other than a Permitted Transfer) without our approval shall be void and constitute a breach of this Agreement. We will not unreasonably withhold approval if all of the following conditions are satisfied:
- (i) we believe the proposed transferee has sufficient business experience, aptitude and financial resources to develop, own and operate all of the remaining Restaurants to be developed under this Agreement and meets our minimum criteria for area developers;
- (ii) you and your Owners and affiliates are in full compliance with all Definitive Agreements;
- (iii) the transferee's owners successfully complete, or make arrangements to attend, the initial training program and the transferee pays us any applicable training fee;
- (iv) the transferee and its owners sign our then-current form of area development agreement (unless we, in our sole discretion, instruct you to assign this Agreement to the transferee), except that: (a) the Term shall be the Term remaining under this Agreement; (b) the transferee need not pay a separate development fee; and (c) the Development Schedule and Development Territory shall be the same Development Schedule and Development Territory specified in this Agreement (modified to reflect the development obligations satisfied prior to the Transfer);
- (v) you or the transferee pay us a $15,000 transfer fee (if the transferee is found by a broker we engage, you must also reimburse us for all commissions we pay to the broker, which amount shall be in addition to the transfer fee);
- (vi) you assign all Franchise Agreements to the transferee in accordance with the transfer provisions under each such Franchise Agreement, including payment of any transfer fee imposed under each such Franchise Agreement;
- (vii) you and your Owners sign a General Release;
- (viii) we choose not to exercise our right of first refusal described in §8.5; and
- (ix) you or the transferring Owner, as applicable, and the transferee satisfy all other conditions we reasonably require as a con
Source: Item 23 — RECEIPT (FDD pages 50–178)
What This Means (2024 FDD)
According to Chop5 Salad Kitchen's 2024 Franchise Disclosure Document, the rights and duties within the Area Development Agreement are personal to the franchisee and their owners. As such, a franchisee cannot engage in a transfer of the agreement without prior written approval from Chop5 Salad Kitchen, with any unapproved transfer being void and constituting a breach of the agreement. However, Chop5 Salad Kitchen will not unreasonably withhold approval if certain conditions are met.
These conditions include Chop5 Salad Kitchen believing the proposed transferee has sufficient business experience, aptitude, and financial resources to develop, own, and operate the remaining restaurants under the agreement, meeting the minimum criteria for area developers. The franchisee, owners, and affiliates must be in full compliance with all definitive agreements. The transferee's owners must successfully complete the initial training program or make arrangements to attend, and the transferee must pay any applicable training fee. The transferee and its owners must sign Chop5 Salad Kitchen's current area development agreement form, with specific stipulations regarding the term, development fee, and development schedule/territory.
Additionally, the franchisee or transferee must pay a $15,000 transfer fee. If a broker is engaged by Chop5 Salad Kitchen, the franchisee must reimburse Chop5 Salad Kitchen for all commissions paid to the broker, in addition to the transfer fee. The franchisee must assign all Franchise Agreements to the transferee according to the transfer provisions under each Franchise Agreement, including any transfer fees. The franchisee and their owners must sign a General Release, and Chop5 Salad Kitchen must choose not to exercise its right of first refusal. Finally, the transferring owner and the transferee must satisfy all other conditions reasonably required by Chop5 Salad Kitchen for approval of the transfer. Chop5 Salad Kitchen will waive clauses (iii) through (ix) for transfers that qualify as Minority Interest Transfers. The franchisee cannot transfer less than all area development rights or transfer rights to multiple transferees. Chop5 Salad Kitchen's consent to a transfer does not waive any claims against the transferor or the right to demand compliance from the transferee.