Can a City Wide franchisee assign their franchise without City Wide's prior written consent?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Assignment. City Wide may sell, transfer or assign this Agreement at any time and thereby be released from any further obligations to Franchisee. Franchisee may not sell, transfer or assign Franchisee's rights to this Agreement without the prior written consent of City Wide, which may be granted or denied.
Any purported assignment or transfer, by operation of law or otherwise, not having the prior written consent of CITY WIDE will be null and void and will constitute a material breach of this Agreement entitling CITY WIDE, at its sole and absolute right, to immediately terminate this Agreement; provided however, that CITY WIDE will not unreasonably withhold its approval of a Transfer to a proposed transferee who is of good moral character and whose business experience and aptitude, financial resources, and other qualifications meet CITY WIDE's then-current standards, so long as Franchisee is in full compliance with this Agreement at the time of the proposed Transfer.
- 13.3 Transfer by Franchisee Resulting in No Loss of Control.
Notwithstanding Section 13.2, if Franchisee or any Affiliated Company is a corporation, the terms and conditions of this Section 13 will not be deemed to apply to any Transfer of the voting stock of, or other ownership interest in, Franchisee or such Affiliated Company, which would not, alone or together with other related or unrelated, previous, simultaneous or proposed Transfers, result in a loss of Control (as defined below) of Franchisee or an Affiliated Company by the persons and/or entities listed on the Acknowledgment Regarding Ownership attached to this Agreement as Attachment G.
For the purposes of this Section 13.3 and Section 13.6 of this Agreement, "Control" means:
- 13.3.1 If Franchisee, an Affiliated Company, or an Owner owns (1) possession or control, whether by ownership of voting securities or otherwise, of fifty-one percent (51%) or more of the voting power in Franchisee or an Affiliated Company, or (2) the contractual power to designate a majority of the directors of Franchisee or an Affiliated Company.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, a franchisee cannot sell, transfer, or assign their rights to the franchise agreement without obtaining prior written consent from City Wide. This requirement is in place because City Wide grants franchises based on the franchisee's business skills and financial capacity, and it is important for City Wide to know and approve of all franchisees.
The FDD specifies that any attempt to transfer the agreement without City Wide's consent is considered a material breach of the agreement, which could lead to immediate termination of the franchise agreement at City Wide's discretion. However, City Wide agrees to not unreasonably withhold approval of a transfer to a proposed transferee who is of good moral character and meets City Wide's standards for business experience, aptitude, financial resources, and other qualifications, provided the franchisee is in full compliance with the agreement at the time of the proposed transfer.
An exception exists regarding the transfer of voting stock or ownership interest in a corporate franchisee or affiliated company. A transfer of stock or ownership is allowed without City Wide's consent if it does not result in a change of control, meaning the original owners listed in the agreement retain at least 51% of the voting power and the ability to designate a majority of the directors.
This provision protects City Wide's interests by ensuring that franchisees meet their standards and that transfers are only made to qualified individuals or entities. It also provides some flexibility for franchisees to transfer ownership within their existing corporate structure without requiring franchisor approval, as long as control of the franchise remains with the original approved owners.