Is City Wide required to obtain the franchisee's consent to assign the franchise agreement?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
SECTION 13. Transfer and Assignment of Agreement
- 13.1 Transfer by CITY WIDE. This Agreement and all rights and duties hereunder may be freely assigned or transferred by CITY WIDE and will be binding upon and inure to the benefit of CITY WIDE'S successors and assigns.
- 13.2 Transfer by Franchisee. Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that CITY WIDE has granted the Franchise in reliance on Franchisee's business skill and financial capacity. It is important to CITY WIDE that Franchisee at all times be known to CITY WIDE and meet CITY WIDE's then-current standards and requirements. Accordingly, except pursuant to the specific terms set forth in this Agreement, neither Franchisee, nor any corporation or other entity, domestic or foreign, which has the voting power and control to elect directly or indirectly through another corporation or entity or series of other corporations or entities a majority of the board of directors of Franchisee ("Affiliated Company"), nor any person possessing an interest or holding shares of stock of any kind or nature in Franchisee or any Affiliated Company ("Owner") will be permitted, without the prior written consent of CITY WIDE, to give away, sell, assign, pledge, lease, sublease, devise, or otherwise transfer, either directly or by operation of law or in any other manner, all or any portion of this Agreement; any of Franchisee's rights or obligations under this Agreement, the Franchised Business; or any shares of stock, partnership interest, or interest of any kind or nature in Franchisee or any Affiliated Company (any such transaction being referred to hereinafter as a "Transfer"). In order to secure compliance by Franchisee with the transfer restrictions contained in this Section, all share or stock certificates of any corporate Franchisee and any Affiliated Company will at all times contain a legend sufficient under applicable law to constitute notice of the restrictions on such stock contained in this
Agreement and to allow such restrictions to be enforceable. Such legend will appear in substantially the following form:
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, City Wide can freely assign or transfer the franchise agreement without the franchisee's consent. Section 13.1 of the agreement explicitly states that City Wide has the right to assign the agreement and its associated rights and duties to others. This transfer is binding on the franchisee and benefits City Wide's successors or assignees.
Conversely, Section 13.2 clarifies that the franchisee's ability to transfer the agreement is significantly restricted. The document emphasizes that the rights and duties within the agreement are personal to the franchisee, and City Wide has granted the franchise based on the franchisee's specific business skills and financial capacity. Therefore, the franchisee cannot give away, sell, assign, pledge, lease, or otherwise transfer any portion of the agreement without City Wide's prior written consent.
This asymmetry in transfer rights is common in franchising. It allows City Wide flexibility in its business operations, such as mergers or acquisitions, without needing individual franchisee approval. However, it also means that a City Wide franchisee is bound to the agreement unless they obtain City Wide's consent for a transfer, which City Wide can withhold at its discretion. Prospective franchisees should carefully consider this provision and its implications for their exit strategy or potential business restructuring.