Is Closet Storage Concepts permitted to transfer its interest in the Franchise Agreement?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
ormity and increase the demand for the
products sold and services rendered by Closet & Storage Concepts System franchisees, Franchisor and its affiliates. Franchisee shall comply with the standards, specifications and requirements set forth by Franchisor in order to uniformly convey the distinctive image of a Franchised Business.
7. SALE OR TRANSFER
- 7.1 Consent to Transfer. Franchisee's rights under this Agreement are personal, and if Franchisee is an individual, Franchisee shall not change, sell, transfer, assign or encumber his/her/their percentage of ownership interest in this Agreement or the Franchised Business, without the prior written consent of Franchisor. Any unauthorized transfer by Franchisee shall constitute a material breach of the Agreement and shall be voidable by Franchisor. If Franchisee is an entity, Section 7.3 shall govern.
- 7.2 Death or Disability. In the event of the death, disability or incapacity of any individual Franchisee or officer or director or member of an incorporated Franchisee or limited liability company or partner of a partnership Franchisee, should the decedent's or disabled or incapacitated person's executor, heir or legal representative, or the business entity, as the case may be, wish to continue as Franchisee under this Agreement, such person shall apply for Franchisor's consent, execute the then-current franchise agreement, and complete the training program to Franchisor's satisfaction, as applicable, as in any other case of a proposed transfer of Franchisee's interest in this Agreement. Such assignment by operation of law shall not be deemed in violation of this Agreement, provided the heirs or legatees or business entity meet the conditions imposed by this Agreement and are acceptable to Franchisor.
If Franchisee is a business entity, this Agreement shall continue in effect upon the death of the largest equity owner, provided that the active management of the business entity shall remain stable and reasonably satisfactory to Franchisor in its sole discretion.
Franchisee's executor, heir or legal representative shall have 180 days from the date of death, disability or incapacity to execute Franchisor's then-current franchise agreement or transfer the franchise rights and business upon the terms and conditions set forth in this Agreement (except that the term shall be the balance of Franchisee's term). At the conclusion of the balance of the term, the new franchisee may exercise any or all of the then applicable renewal rights. Franchisor reserves the right to operate or oversee the operation of the Franchised Business if Franchisor believes, in Franchisor's sole judgment, that the Franchised Business is not being operated in a manner consistent with Franchisor's System or specifications.
7.3 Entity Ownership Changes. A transfer requiring the prior written consent of Franchisor shall be deemed to occur upon any sale, transfer, assignment or encumbrance of any of Franchisee's interest in this Agreement or the Franchised Business. Additionally, a transfer requiring consent shall also be deemed to occur: (i) if Franchisee is a corporation or limited liability company, upon any change, assignment, sale, pledge or transfer of any of the voting stock or membership interests of Franchisee including any ownership restructuring of Franchisee or of any owners of Franchisee; or (ii) if Franchisee is a partnership, upon the change, assignment, sale, pledge or transfer of any partnership ownership, including an ownership restructuring of Franchisee or of any owners of Franchisee. Franchisee shall notify Franchisor of any change in stock ownership, membership interests or partnership ownership interests in Franchisee while this Agreement is in effect which shall result in a change, sale, transfer or assignment within the meaning of this Section 7.3.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, the Franchise Agreement outlines conditions under which a franchisee can transfer their interest. Specifically, if the franchisee is an individual, they cannot sell, transfer, assign, or encumber their ownership interest without prior written consent from Closet Storage Concepts. An unauthorized transfer constitutes a breach of the agreement and can be voided by Closet Storage Concepts.
If the franchisee is a business entity, the agreement continues upon the death of the largest equity owner, provided the active management remains stable and satisfactory to Closet Storage Concepts. In the event of death, disability, or incapacity, the executor, heir, or legal representative can apply for consent to continue as a franchisee, execute the current franchise agreement, and complete the training program.
For a transfer to be approved, the franchisee must provide Closet Storage Concepts with a copy of the executed purchase agreement, including the transferee's agreement to fulfill all obligations under the original agreement. The transferee must meet Closet Storage Concepts' managerial and business standards, possess good character and credit rating, demonstrate the ability to conduct the business, and have adequate financial resources. The transferee cannot be in a business that competes with Closet Storage Concepts, unless they are an existing franchisee. The transferee must also execute the current Franchise Agreement and complete the training program at their own expense. A transfer fee equal to 50% of the current Initial Franchise Fee, with a minimum of $24,750, must be paid to Closet Storage Concepts. Finally, the transferee must demonstrate they have received approval from the landlord to take over possession of the Franchised Business' lease.