What is the relationship between the Franchise Agreement and the Transfer Agreement for Closet Storage Concepts?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
ims against Franchisor and its affiliates and their officers, directors, equity owners, agents, employees, attorneys and accountants in their corporate and individual capacities; provided, however, the release shall not release any liability specifically provided for by any applicable 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;
- 7.3.2.8 The transferee and its manager shall complete Franchisor's training program to Franchisor's satisfaction at t
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 the initial terms and conditions for operating a franchise, while the Transfer Agreement comes into play when a franchisee wants to transfer their rights and obligations to a new owner. The Franchise Agreement specifies that the franchisee's rights are personal and cannot be transferred without Closet Storage Concepts' prior written consent, and any unauthorized transfer is considered a material breach of the agreement.
When a franchisee seeks to transfer their Closet Storage Concepts franchise, several conditions must be met. The franchisee must provide Closet Storage Concepts with a copy of the executed purchase agreement, including the transferee's agreement to assume all obligations under the original Franchise Agreement. The potential transferee must demonstrate that they meet Closet Storage Concepts' managerial, business, and financial standards. The transferee may be required to execute Closet Storage Concepts' then-current Franchise Agreement, and both the franchisee and transferee must enter into a transfer agreement approved by Closet Storage Concepts.
Furthermore, a transfer fee is required, set at 50% of the then-current Initial Franchise Fee, with a minimum of $24,750. The transferee and their manager must also complete Closet Storage Concepts' training program at their own expense. The original franchisee remains bound by the post-termination provisions of the Franchise Agreement, including non-competition clauses, even after the transfer. The Transfer Agreement formalizes the transfer, ensuring that the new franchisee is bound by the same obligations and standards as the original franchisee, while also protecting Closet Storage Concepts' interests and brand standards.