According to the Cordova FDD, what constitutes a 'transfer' of the Cordova franchise?
Cordova Franchise · 2025 FDDAnswer from 2025 FDD Document
| i. | Franchisee's obligations on termination/non-renewal | 6, 17 | You must: pay all sums that you owe to us under the Franchise Agreement and all other agreements with us; cease owning and operating the Franchised Business; cease representing yourself as a franchisee of ours; permanently cease using and/or accessing the System, the Licensed Marks, our confidential information, the Manuals, the Business Management System, the Business Management System Data, and the System Supplies; return the Manuals and all confidential information to us in the original form provided to you and document the destruction of all electronic files related to same; completely de-identify the location and/or facility associated with the Franchised Business; as requested by us, transfer to us all data, telephone listings, digital media, accounts, web listings and websites associated with the Franchised Business; and abide by the post-termination non competition covenants and restrictions. |
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| j. | Assignment of the contract by franchisor | 14.A. | No restriction on our right to assign. |
| k. | "Transfer" by franchisee definition | 14.B. | A transfer means and includes, whether voluntary or involuntary, conditional or unconditional, direct or indirect: (a) an assignment, sale, gift, transfer, pledge or sub-franchise; (b) the grant of a mortgage, charge, lien or security interest, including, without limitation, the grant of a collateral assignment; (c) a merger, consolidation, exchange of shares or other ownership interests, issuance of additional ownership interests or securities representing or potentially representing ownership interests, or redemption of ownership interests; and (d) a sale or exchange of voting interests or securities convertible to voting interests, or an agreement granting the right to exercise or control the exercise of the voting rights of any holder of ownership interests or to control the operations or affairs of Franchisee. |
| l. | Franchisor's approval of transfer by franchisee | 14.B. | Transfers require our prior written consent, which may be granted or withheld in our discretion. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 33–37)
What This Means (2025 FDD)
According to Cordova's 2025 Franchise Disclosure Document, a 'transfer' encompasses a broad range of transactions, whether voluntary or involuntary, conditional or unconditional, direct or indirect. This definition is important for prospective franchisees to understand, as any action falling under this definition requires Cordova's prior written consent, which Cordova may grant or withhold at its discretion.
Specifically, a transfer includes (a) an assignment, sale, gift, transfer, pledge, or sub-franchise. (b) the grant of a mortgage, charge, lien, or security interest, including a collateral assignment. (c) a merger, consolidation, exchange of shares or other ownership interests, issuance of additional ownership interests or securities representing ownership interests, or redemption of ownership interests. (d) a sale or exchange of voting interests or securities convertible to voting interests, or an agreement granting the right to exercise or control the exercise of the voting rights of any holder of ownership interests or to control the operations or affairs of Franchisee.
This broad definition means that franchisees must seek approval from Cordova for various actions related to their franchise, not just an outright sale. This requirement allows Cordova to maintain control over who operates its franchises and ensures that any new operators meet its standards. Franchisees should be aware that Cordova's approval is not guaranteed and may be subject to certain conditions.
Prospective Cordova franchisees should carefully consider these transfer provisions and discuss any potential future scenarios with Cordova to understand the implications. This includes understanding the conditions for approval, Cordova's right of first refusal, and any associated fees or requirements. Understanding these terms is crucial for managing the franchise and planning for future business decisions.