On what terms can Cicis purchase the transferred interest under its right of first refusal?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in | Summary | |
|---|---|---|---|
| Area Development Agreement – Section 5.C. | Franchise or other Agreement | You must (i) pay all amounts due us and our affiliates and third- party vendors; (ii) not be in default; (iii) provide us all information and documents we reasonably request including copies of all agreements executed in relation to transfer; (iv) execute a general release; (v) remain liable for pre-transfer obligations; (vi) pay or caused to be paid a transfer fee; and (vii) execute a non-compete agreement. Transferee must (i) meet our criteria; (ii) assume post-transfer obligations; and (iii) execute our then-standard Area Development Agreement. | |
| n. Franchisor’s right of first refusal to acquire franchisee’s business | Franchise Agreement – Section 13.C. Area Development Agreement – Section 5.F. | Within 30 days after notice, we have the option to purchase the transferred interest on the same terms and conditions offered by a third party. Within 30 days after notice, we have the option to purchase the transferred interest on the same terms and conditions offered by a third party. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 45–53)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, Cicis has the option to purchase the transferred interest if a franchisee decides to sell their business. Specifically, Cicis has the right of first refusal, meaning they can step in and buy the business on the same terms and conditions that a third party has offered. This applies to both the Franchise Agreement and the Area Development Agreement.
This provision gives Cicis significant control over who becomes a franchisee within their system. If a franchisee receives an offer to sell their business, Cicis has the opportunity to match that offer and acquire the business themselves. This allows Cicis to maintain consistent brand standards and operational control by ensuring that only approved individuals or entities become franchisees.
For a prospective franchisee, this means that selling the business isn't solely their decision. Cicis has the power to preempt the sale if they choose. Therefore, when planning an exit strategy, franchisees must consider that Cicis could exercise its right of first refusal, potentially altering the expected timeline or financial outcome of the sale. It is important to note that the FDD does not specify how the 'same terms and conditions' are defined in situations where the offer from a third party includes non-monetary considerations.
It would be prudent for a potential Cicis franchisee to discuss with Cicis how they typically exercise this right of first refusal and what factors they consider when deciding whether to purchase a transferred interest. Understanding Cicis's past practices can provide valuable insight into how this clause might affect a franchisee's ability to sell their business in the future.