How does Corcoran define a 'Transfer of the Franchise'?
Corcoran Franchise · 2025 FDDAnswer from 2025 FDD Document
nerships.** If you are a sole proprietorship or partnership, we expressly consent to the assignment of this Agreement, without payment of a fee, to an entity owned and controlled by the same Owners, provided that the Owners execute an assignment agreement and guaranty of the assignee's obligations to us. You must notify us in writing of any proposed assignment under this Section and must provide and/or sign all documents we request including, assignment documents, Articles of Incorporation or Organization and Bylaws.
- 15.4 Transfer of the Franchise – Definition. "Transfer of the Franchise" will mean any transaction or series of transactions that results in: (i) the sale or transfer of substantially all of the Business's assets; (ii) the majority Owner(s) before the transaction(s) holding less than 51% equity interest in you or the
Business's assets; (iii) another entity becoming a franchisee; or (iv) the Owner(s) no longer controlling or managing the Business. The Transfer of the Franchise may include transfers resulting from a divorce, death, insolvency, dissolution, declaration of or transfer in trust, or a foreclosure on the Business assets. If any Owners are entities, a Transfer of the Franchise will be deemed to occur if such Owner entity experiences any of these events or transactions.
- 15.5 Operational Control – Trust. In the event a trust is an Owner of Franchisee: (a) Prior to the Opening Date, Owner shall provide Franchisor with copies of all trust instruments and all documents establishing that the trustee(s) have legal authority to enter into this Agreement on behalf of the Owner/trust and bind the Owner/trust to the terms of this Agreement; (b) after the Opening Date, Owner shall provide Franchisor with copies of any amendment(s) to the trust instruments within seven (7) days of the entry of such amendment(s); (c) all beneficiaries of the trust shall be Guarantors and at the time of signing the Agreement, the beneficiaries shall sign the Guaranty of Payment and Performance; and (d) Guarantor(s) shall, at all times, directly (i) control all aspects of Franchisee and the operation of the Business; and (ii) serve as trustee(s) of the trust and retain sole control over the voting of the trust's equity interest in Franchisee. Franchisee acknowledges and agrees that: (x) if the Guarantor(s) do not maintain operational control of the entire Business, Franchisee and the trust, such an event will constitute a transfer as described in Section 15.4 of this Agreement; and (y) Franchisee must comply with all applicable provisions of this Section 15. Franchisee further acknowledges and agrees that if the Guarantor(s) desires to turn over operational control of the Franchisee, the trust or the Franchise to one or more trust beneficiaries, such beneficiaries must satisfy all conditions of approval described in Section 15.7 of this Agreement. Nothing contained herein is or should be deemed to constitute our consent or acquiescence to any transfer as described in Section 15.4 of this Agreement.
- 15.6 Prohibited Assignments or Transfers of the Franchise. You may not complete a Transfer of the Franchise without our prior written approval, which will be subject to our Reasonable Business Judgment. Failure to obtain our approval will be a material breach of this Agreement. Any attempted Transfer of the Franchise not expressly permitted by this Agreement or approved by us will be null and void, and you will remain liable for all obligations under this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 75–276)
What This Means (2025 FDD)
According to Corcoran's 2025 Franchise Disclosure Document, a 'Transfer of the Franchise' is specifically defined as any transaction or series of transactions that result in several scenarios. These include the sale or transfer of substantially all of the business's assets, or situations where the majority owner(s) before the transaction hold less than 51% equity interest in the franchisee or the business's assets. Additionally, if another entity becomes a franchisee, or if the owner(s) no longer control or manage the business, it is considered a transfer of the franchise.
This definition is broad and encompasses various situations, including those resulting from significant life events such as divorce, death, insolvency, dissolution, declaration of or transfer in trust, or a foreclosure on the business assets. Furthermore, if any owners are entities, a transfer of the franchise is deemed to occur if the owner entity experiences any of these events or transactions. This means that franchisees need to be aware that changes in ownership, control, or asset structure can trigger the transfer provisions of the franchise agreement.
Corcoran requires that franchisees obtain prior written approval before completing a transfer of the franchise, and failure to do so constitutes a material breach of the agreement. Any attempted transfer not expressly permitted or approved by Corcoran will be considered null and void, with the franchisee remaining liable for all obligations under the agreement. After a transfer, the franchisee remains liable for events that occurred before the transfer and for obligations that survive termination of the agreement, including indemnification obligations for claims arising before the transfer.
To gain approval for a transfer, Corcoran requires thirty business days' advance written notice of any proposed transfer. The potential new owner or franchisee, referred to as the 'Transferee,' must submit all documents reasonably required for approval. Corcoran's approval is based on factors such as the transferee being a licensed real estate broker, their business experience, character, reputation, financial condition, and the proposed transfer documents. The transferee may also be required to execute the then-current form of franchise agreement and guaranty, pay any outstanding indebtedness owed to Corcoran, pay a $5,000 transfer fee, and execute a release of all claims against Corcoran. Corcoran also has the right of first refusal to purchase the franchise interest under the same terms as a bona fide offer received by the franchisee.