Under what conditions are Cordova transfer fees collectable?
Cordova Franchise · 2025 FDDAnswer from 2025 FDD Document
shall constitute a breach of this Agreement and shall convey to the transferee no rights or interests in this Agreement; and
- (5) In the event of a Transfer of this Agreement that is approved by Franchisor, Franchisee shall not be relieved of Franchisee's obligations under this Agreement whether said obligations accrued and/or arose prior to and/or after the date of Transfer.
14.C. CONDITIONS FOR APPROVAL OF TRANSFER
Provided Franchisee and each Owner and Spouse, respectively, are in substantial compliance with this Agreement and the Ancillary Agreements, and Franchisor does not elect to exercise Franchisor's right of first refusal as set forth in Article 14.F. below, Franchisor shall not unreasonably withhold its approval of a Transfer by Franchisee or an Owner. The proposed transferee (including such assignee's owner(s) and spouse(s) if the proposed transferee is a Corporate Entity) must be of good moral character, have sufficient business experience, aptitude and financial resources to own and operate a Cordova Business, and otherwise meet Franchisor's then applicable standards for franchisees as determined by Franchisor in its sole, but reasonable discretion. Furthermore, the proposed transferee and the proposed transferee's owners and spouses may not own or operate, or intend to own or operate, a Competitive Business. Franchisee agrees that Franchisor may condition approval of a Transfer upon Franchisee's satisfaction (either before, or contemporaneously with, the effective date of the Transfer) of the following:
- (1) Franchisee must provide written notice to Franchisor of the proposed Transfer of this Agreement at least 30 days prior to the Transfer, and Franchisee must have also satisfied the obligations set forth in Article 14.F. below;
- (2) All accrued monetary obligations of Franchisee and all other outstanding obligations to Franchisor and/or Franchisor's affiliates under this Agreement and the Ancillary Agreements must be satisfied in a timely manner, and Franchisee must satisfy all trade, supplier, and vendor accounts and other debts, of whatever nature or kind, in a timely manner;
- (3) Franchisee, each Owner, and each Spouse must not be in default or material breach of this Agreement or the Ancillary Agreements;
- (4) The transferee shall be bound by all terms and conditions of this Agreement, and each owner of the transferee and their respective spouses shall personally execute the Franchise Owner and Spouse Agreement and Guaranty in the form attached to this Agreement as Exhibit 1;
- (5) All obligations of Franchisee under this Agreement and the Ancillary Agreements shall be assumed by the transferee, each individual owner of transferee, and their respective spouses in a manner satisfactory to Franchisor;
- (6) Franchisee, each Owner, and each Spouse must execute the General Release attached to this Agreement as Exhibit 5 releasing Franchisor, Franchisor's affiliates and Franchisor's past and present officers, directors, shareholders, members, partners, agents, representatives, independent contractors,
servants and employees, of any and all claims against Franchisor for matters arising on, or before, the effective date of the Transfer;
Source: Item 23 — RECEIPTS (FDD pages 44–195)
What This Means (2025 FDD)
According to Cordova's 2025 Franchise Disclosure Document, a transfer fee of $20,000 is generally required when a franchisee transfers their franchise. Cordova defines "transfer" broadly, including assignments, sales, gifts, pledges, subfranchises, mortgages, mergers, consolidations, exchanges of shares, or any other transfer of ownership interests or voting rights. This broad definition means that nearly any change in ownership or control could trigger the transfer fee.
However, the FDD outlines specific conditions that must be met for Cordova to approve a transfer, and thus for the transfer fee to become applicable. The franchisee, owners, and spouses must be in substantial compliance with the franchise agreement and related ancillary agreements. Cordova retains the right of first refusal, meaning they can choose to purchase the franchise themselves instead of approving a transfer to a third party. The proposed transferee must meet Cordova's standards for franchisees, including good moral character, sufficient business experience, aptitude, and financial resources. The transferee cannot own or operate a competitive business.
In addition to these qualifications, Cordova may require the franchisee to meet several conditions before or during the transfer. These include providing written notice at least 30 days prior to the transfer and satisfying any obligations outlined in Article 14.F of the franchise agreement. All outstanding monetary and other obligations to Cordova and its affiliates must be satisfied, and the franchisee, owners, and spouses must not be in default or material breach of the agreement. The transferee must agree to be bound by all terms of the franchise agreement, and their owners and spouses must execute the Franchise Owner and Spouse Agreement and Guaranty. The transferee must also assume all obligations of the franchisee under the agreement. The transferee may also be required to improve the Administrative Office to meet current standards, complete training programs, and enter into a subordination agreement regarding payment obligations.