Is the agreement between Cilantro Taco Grill and Armando Perez transferable to a new owner of the franchise?
Cilantro_Taco_Grill Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee and the Principals have represented to Franchisor that they have entered into this Agreement with the intention of complying fully with the obligations to construct a Cilantro Taco Grill restaurant hereunder and not for the purpose of reselling the rights to develop the restaurant hereunder. Franchisee and the Principals understand and acknowledge that Franchisor has granted such rights in reliance on the business skill, financial capacity, personal character of, and expectations of performance hereunder, by Franchisee and the Principals and that this Agreement and the rights and obligations hereunder may not be transferred until after the Cilantro Taco Grill restaurant is open for business to the public in accordance with Section 8.3, and then only in accordance with Article 16 hereof.
16.3.3 The transferee has agreed to complete Franchisor's HQ Initial Training program to Franchisor's satisfaction;
16.3.4 Franchisee has paid all amounts owed to Franchisor and third party creditors;
16.3.5 The transferee has executed, for a term ending on the expiration date of this Agreement and with such renewal terms as may be provided by this Agreement, Franchisor's then-standard form of Franchise Agreement, which may have terms and conditions different from this Agreement, except that the transferee shall not be required to pay the Initial Franchise Fee;
16.3.6 Franchisee and the transferee and each of Franchisee's and the transferee's Principals shall have executed a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor and Franchisor's officers, directors, shareholders, members and
employees in their corporate and individual capacities, including, without limitation, claims arising under federal, state, and local laws, rules and ordinances. Franchisee will agree to subordinate any claims Franchisee may have against the transferee to Franchisor, and indemnify Franchisor against any claims by the transferee relating to misrepresentations in the transfer process, specifically excluding those representations made by Franchisor in the Franchise Disclosure Document given to the transferee;
- 16.3.7 Franchisor has granted written approval of the material terms and conditions of the Transfer, including, without limitation, that the price and terms of payment will not adversely affect the Franchised Business's operation.
However, Franchisor's approval of a Transfer is not in any way a representation or warranty of the transferee's success or the soundness of transferee's decision to purchase the Franchise on such terms and conditions.
Franchisee shall provide Franchisor all proposed transfer documents for Franchisor's review at least thirty (30) days prior to a closing of the proposed Transfer;
Source: Item 18 — PUBLIC FIGURES (FDD page 48)
What This Means (2024 FDD)
According to Cilantro Taco Grill's 2024 Franchise Disclosure Document, the Franchise Agreement between Cilantro Taco Grill and a franchisee like Armando Perez is transferable under certain conditions. The agreement and the rights and obligations within it cannot be transferred until the Cilantro Taco Grill restaurant is open for business to the public. After the restaurant is open, a transfer can occur according to Article 16 of the agreement.
For a transfer to be approved by Cilantro Taco Grill, several conditions must be met. The potential new franchisee must complete Cilantro Taco Grill's HQ Initial Training program to the franchisor's satisfaction. All outstanding amounts owed to Cilantro Taco Grill and third-party creditors must be paid by the current franchisee. The new franchisee must execute Cilantro Taco Grill's then-standard form of Franchise Agreement, which may have different terms and conditions than the original agreement, although the transferee won't have to pay the initial franchise fee.
Furthermore, both the current franchisee, the transferee, and their principals must sign a general release of all claims against Cilantro Taco Grill and its officers, directors, shareholders, members, and employees. The current franchisee must also agree to subordinate any claims they have against the transferee to Cilantro Taco Grill and indemnify Cilantro Taco Grill against any claims by the transferee related to misrepresentations during the transfer process, excluding those made by Cilantro Taco Grill in the Franchise Disclosure Document. Finally, Cilantro Taco Grill must grant written approval of the material terms and conditions of the transfer, including the price and payment terms, ensuring they do not adversely affect the Franchised Business's operation. The franchisee must provide all proposed transfer documents to Cilantro Taco Grill for review at least 30 days before the transfer's closing.
It is important to note that Cilantro Taco Grill's approval of a transfer does not represent or warrant the transferee's success or the soundness of their decision to purchase the franchise. This means that while Cilantro Taco Grill has requirements for transfer, the responsibility for assessing the business opportunity and potential profitability lies with the transferee.