What is the Closet Storage Concepts franchisee's right of first refusal during the renewal term?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
- 2.5 Franchisee Right of First Refusal.
If at any time during the initial term or the Renewal Period, Franchisor reasonably determines, based on pertinent marketing data, that one (1) or more additional Closet & Storage Concepts business locations are necessary in the Territory in order to avoid loss of market position and business to competitors and that Franchisee is unable to adequately service the Territory by its existing Closet & Storage Concepts business location(s), Franchisee, Franchisor or a new franchisee licensed by Franchisor may operate such additional business location so long as the following conditions are met:
2.5.3 Franchisor communicates in writing to Franchisee its intention to open said additional location, based on the reasonable market projections and determinations set forth above;
2.5.4 Franchisor provides Franchisee a thirty (30) day right of first refusal to elect to open the additional location in the Territory, following receipt of notification from Franchisor;
2.5.5 in the event Franchisee elects not to open the additional Closet & Storage Concepts business location pursuant to this Section or fails to open said location within three (3) months after it makes the election (except if such failure is due to reasons beyond the control of Franchisee such as Acts of God, war or similar occurrences provided that Franchisee has made a good faith effort to open the location), Franchisor shall have the right to accept, in its sole and exclusive discretion, offers from other parties to become a franchisee in the Territory or to operate a Franchisor-owned Closet & Storage Concepts business location in the Territory;
2.5.6 in the event that Franchisee elects to open the additional Closet & Storage Concepts business location pursuant to this Section, the right to operate such location shall be governed by the terms and conditions of this Agreement as amended, including, but not limited to, Franchisee's obligation to pay Royalties under Article 3 of this Agreement and NAP and Local Advertising fees with respect to each and every additional Closet & Storage Concepts business location established hereunder by aggregating the Gross Revenues of all of its locations within a single Territory.
There will be no payment of any additional initial franchise fee with respect to an additional location;
- 2.5.7 the election of Franchisee not to open the additional Closet & Storage Concepts business location pursuant to this Section shall not prevent Franchisee from exercising its rights to open additional locations in the Territory in accordance with Section 1.4 of this Agreement, provided, however, that Franchisor may consider the proximity of any such additional location to the additional Closet & Storage Concepts business location(s) opened hereunder in determining whether to give its consent to any such other additional location, and Franchisor's decision to withhold its consent based upon such consideration shall not be or be deemed to be unreasonable; and
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts's 2025 Franchise Disclosure Document, during the renewal period, a franchisee has a right of first refusal to open additional locations within their territory. If Closet Storage Concepts determines, based on marketing data, that an additional location is needed to avoid losing market share and that the existing franchisee is not adequately serving the territory, the franchisee has the first option to open that location.
Closet Storage Concepts must communicate in writing its intention to open an additional location, providing the data that supports the decision. The franchisee then has 30 days from the notification to decide whether to open the additional location.
If the franchisee chooses not to open the additional Closet Storage Concepts location or fails to open it within three months after electing to do so (unless due to circumstances beyond their control and with a good faith effort to open), Closet Storage Concepts has the right to offer the franchise to other parties or operate a company-owned location in the territory. If the franchisee elects to open the additional location, it will be governed by the existing agreement, including royalty payments and advertising fees, based on the combined gross revenues of all locations within the territory. There is no additional initial franchise fee for the additional location.
The franchisee's decision not to open an additional location does not prevent them from opening other locations in the territory under the standard terms of the agreement. However, Closet Storage Concepts may consider the proximity of any new location to the previously considered additional location when deciding whether to approve it.