In the context of the Closet Storage Concepts Transfer Agreement, what is the role of the 'Transferee'?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
e state statute regulating franchising. Our current
form or release is attached to this Agreement as Exhibit "5";
- 7.3.2.4 Franchisee has provided Franchisor a copy of the executed purchase agreement relating to the proposed transfer with all supporting documents and schedules, including transferee's assumption of and agreement to discharge all of Franchisee's obligations under this Agreement;
- 7.3.2.5 The transferee has demonstrated to Franchisor's satisfaction that transferee or its designated manager meets Franchisor's managerial and business standards; possesses a good moral character, business reputation and credit rating; has the aptitude and ability to conduct the business to be transferred; and has adequate financial resources and capital to meet the performance obligations of this Agreement; however, transferee shall not be in the same business as Franchisor either as licensor, franchisor, independent operator or licensee of any other business, chain or network which is similar in nature or in competition with Franchisor or Closet & Storage Concepts System franchisees, except that the transferee may be an existing franchisee of Franchisor;
- 7.3.2.6 The transferee has executed Franchisor's then-current Franchise Agreement, at Franchisor's option;
- 7.3.2.7 Franchisee or transferee has paid Franchisor a transfer fee equal to 50% of the then current Initial Franchise Fee, subject to a minimum of $24,750;
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, the 'transferee' in a transfer agreement is essentially the party acquiring the existing franchise. The transferee must meet several conditions to be approved by Closet Storage Concepts. They need to demonstrate managerial and business competence, possess good moral character, business reputation, and credit rating, and have the aptitude and financial resources to meet the obligations of the Franchise Agreement. Importantly, the transferee cannot be involved in a business that competes with Closet Storage Concepts, unless they are an existing franchisee.
Furthermore, the transferee may be required to execute Closet Storage Concepts' then-current Franchise Agreement, at the franchisor's discretion. Either the franchisee (the seller) or the transferee (the buyer) must pay Closet Storage Concepts a transfer fee, which is equal to 50% of the current Initial Franchise Fee, but with a minimum of $24,750. The transferee and their manager must also complete Closet Storage Concepts' training program to the franchisor's satisfaction, at their own expense, within a timeframe set by Closet Storage Concepts.
Finally, the transferee must demonstrate that they have received approval from the landlord to take over possession of the franchised business's lease. These stipulations ensure that any new franchisee taking over an existing Closet Storage Concepts location is well-qualified, properly trained, and financially stable, maintaining the brand's standards and protecting the interests of the existing franchise network.