Is a proposed transferee's failure to meet City Publications' then-current reasonable qualifications considered good cause to refuse a transfer?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
- ◼ A provision which permits a Franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause.
The subdivision does not prevent a Franchisor from exercising a right of first refusal to purchase the franchise.
Good cause shall include, but is not limited to:
◼ The failure of the proposed transferee to meet the Franchisor's then-current reasonable qualifications or standards.
◼ The fact that the proposed transferee is a competitor of the Franchisor or Subfranchisor.
◼ The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
◼ The failure of the Franchisee or proposed transferee to pay any sums owing to the Franchisor or to cure any default in the Franchise Agreement existing at the time of the proposed transfer.
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 Franchise Disclosure Document, the failure of a proposed transferee to meet the franchisor's then-current reasonable qualifications or standards is considered good cause for refusing a transfer. This means that City Publications has the right to deny a transfer if the person or entity seeking to take over the franchise does not meet the criteria that City Publications has established at that time. These qualifications and standards are expected to be reasonable, suggesting they should be related to the transferee's ability to successfully operate the franchise.
This provision protects City Publications by ensuring that any new franchisee taking over an existing location is capable of maintaining the brand's standards and reputation. For a franchisee looking to sell their business, it's crucial to find a buyer who not only has the financial resources but also meets City Publications' operational and managerial requirements. Failure to do so could result in the transfer being rejected, potentially delaying or even preventing the sale of the franchise.
Other factors that City Publications may consider as good cause to refuse a transfer include if the proposed transferee is a competitor, is unwilling to comply with all lawful obligations, or has outstanding payments due to City Publications. Therefore, franchisees should ensure potential buyers are fully aware of and prepared to meet all of City Publications' requirements to facilitate a smooth transfer process.