Can Coffee News unreasonably withhold consent for a transfer of a franchise?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
- 11.2 Nontransferability of Franchisee's Interest. Franchisee agrees that its interest in this Agreement is not transferable and shall not be sold, pledged, hypothecated, assigned or transferred without the express written consent of Franchisor, provided that Franchisor's consent shall not be unreasonably withheld.
When a transfer is granted by Franchisor, the transferee franchisee shall execute Coffee News' then current Franchise Agreement and related documents to govern the remaining term of this Agreement.
- 11.3 Ownership Changes.
If Franchisee is a corporation or partnership, Franchisee agrees to notify Franchisor of any change in stock ownership or partnership interest in Franchisee while this Agreement is in effect.
Any such change which, together with all prior changes, results in a change of the person or persons having control of the entity shall be a transfer subject to the provisions of this paragraph 10 and its subparagraphs.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, a franchisee's interest in the Franchise Agreement is not transferable without the express written consent of Coffee News. However, Coffee News's consent cannot be unreasonably withheld. This provision protects the franchisee from arbitrary denial of a transfer request.
This means that if a Coffee News franchisee wants to sell their franchise, they need to get approval from Coffee News. Coffee News can't just say no for any reason; they need to have a legitimate business reason for withholding their consent. This is a fairly standard clause in franchise agreements, as franchisors want to ensure that any new franchisee meets their standards and is capable of running the business successfully.
When a transfer is approved by Coffee News, the new franchisee will be required to sign Coffee News's current Franchise Agreement. This ensures that the franchise operates under the most up-to-date terms and conditions. The new agreement will govern the remaining term of the original agreement. This is also a common practice, allowing the franchisor to keep the franchise network consistent and current.
If the Coffee News franchisee is a corporation or partnership, they must notify Coffee News of any changes in stock ownership or partnership interest. Any change that results in a shift of control of the entity is considered a transfer and is subject to the same approval process. This prevents franchisees from circumventing the transfer process by simply changing the ownership structure of the business.