What conditions must be met for Cost Cutters Family Hair Salon to approve the transfer of the agreement?
Cost_Cutters_Family_Hair_Salon Franchise · 2024 FDDAnswer from 2024 FDD Document
20.4 APPROVAL OF TRANSFER; CONDITIONS FOR APPROVAL. The rights granted to the FRANCHISEE pursuant to this Agreement may be assigned or transferred by the FRANCHISEE only with the prior written approval of COST CUTTERS. COST CUTTERS will not unreasonably withhold its consent to any transfer of this Agreement provided that the FRANCHISEE and the transferee Franchisee comply with the following conditions: (A) the FRANCHISEE has complied in all respects with Article 13 of this Agreement; (B) all of the FRANCHISEE'S monetary obligations due to COST CUTTERS have been paid in full, and the FRANCHISEE is not otherwise in default under this Agreement; (C) the FRANCHISEE has executed a written agreement in a form satisfactory to COST CUTTERS in which the FRANCHISEE agrees to observe all applicable obligations and covenants contained in this Agreement; (D) the transferee Franchisee and the holders of its ownership interests agree to be personally liable to discharge all of the FRANCHISEE'S obligations under this Agreement, and will enter into a written agreement in a form satisfactory to COST CUTTERS assuming and agreeing to discharge all of the FRANCHISEE'S obligations and covenants under this Agreement; (E) the transferee Franchisee will have demonstrated to COST CUTTERS' satisfaction that he, she or it meets COST CUTTERS' managerial, financial and business standards for new Franchisees, possesses a good business reputation and credit rating, and possesses the aptitude and ability to conduct the franchised business (as may be evidenced by prior related business experience or otherwise); (F) the transferee Franchisee and all parties having a legal or beneficial interest in the transferee Franchisee including, if applicable, the holders of all ownership interests in the transferee Franchisee and the Personal Guarantors of the transferee Franchisee will execute COST CUTTERS' then-current standard Franchise Agreement for a term ending on the expiration date of this Agreement and such other ancillary agreements as COST CUTTERS may require for the transfer of the FRANCHISEE'S Business; (G) the transferee Franchisee will not be required to pay the Initial Franchise Fee, however, the transferee Franchisee will be required to pay the Continuing Fees and the Advertising Fees to COST CUTTERS at the rate specified in this Agreement; (H) the transferee Franchisee has purchased the Franchised Location or has acquired a lease
Source: Item 23 — RECEIPT (FDD pages 76–439)
What This Means (2024 FDD)
According to the 2024 Cost Cutters Family Hair Salon Franchise Disclosure Document, the rights granted to the franchisee can only be assigned or transferred with prior written approval from Cost Cutters Family Hair Salon. Cost Cutters Family Hair Salon will not unreasonably withhold consent to the transfer, provided that both the franchisee and the transferee franchisee meet specific conditions.
The conditions include the franchisee complying with Article 13 of the agreement, which likely outlines procedures for selling the business or assets. The franchisee must also have paid all monetary obligations to Cost Cutters Family Hair Salon in full and not be in default under the agreement. A written agreement, satisfactory to Cost Cutters Family Hair Salon, must be executed where the franchisee agrees to observe all applicable obligations and covenants. The transferee franchisee and holders of ownership interests must agree to be personally liable for all obligations under the agreement, entering into a written agreement to discharge these obligations.
Furthermore, the transferee franchisee must demonstrate that they meet Cost Cutters Family Hair Salon's managerial, financial, and business standards for new franchisees, possessing a good business reputation, credit rating, aptitude, and ability to conduct the franchised business. The transferee franchisee and all parties with legal or beneficial interest must execute Cost Cutters Family Hair Salon's current standard Franchise Agreement for a term ending on the current agreement's expiration date, along with any other ancillary agreements required. While the transferee franchisee is not required to pay the initial franchise fee, they must pay the continuing and advertising fees at the rate specified in the agreement. Finally, the transferee franchisee must have purchased the franchised location or acquired a lease for it.