Does Cost Cutters Family Hair Salon have any restrictions on assigning the franchise contract?
Cost_Cutters_Family_Hair_Salon Franchise · 2024 FDDAnswer from 2024 FDD Document
nnepin County, Minnesota (Subject to State Law) | | w. Choice of law | Article 17.1 | | Governing law will be the laws of the state where the Franchised Area is located (Subject to State Law) |
| Provision | Section in Franchise Agreement | Summary | |
|---|---|---|---|
| franchise agreement (for a Cost Cutters store or any other brand store) between FRANCHISEE (or any of its affiliates) and Cost Cutters, or FRANCHISEE (or any of its affiliates) has terminated another franchise agreement with Cost Cutters without cause | |||
| i. | Your obligations on termination/ nonrenewal | Article 11 | You must cease using Cost Cutters' marks; alter your Franchised Location to distinguish it from Cost Cutters Businesses; pay what you owe Cost Cutters pursuant to the Franchise Agreement; return all printed materials Cost Cutters provided you; and transfer your telephone directory listings to Cost Cutters |
| j. | Assignment of the contract by Cost Cutters | Article 20.1 | No restriction on Cost Cutters' right to assign |
| k. | "Transfer" by you – defined | Articles 20.2 and 20.3 | Assignment of rights under the Franchise Agreement |
| l. | Cost Cutters' approval of transfer by you | Article 20.4 | Cost Cutters has the right to approve any transfer made by you but will not unreasonably withhold its consent |
| m. | Conditions for Cost Cutters' approval of transfer | Articles 20.4, 20.6 and 20.7 | You pay all money owed to Cost Cutters; comply with Cost Cutters' right of first refusal; complete a written agreement satisfactory to Cost Cutters; transferee's shareholders agree to be personally bound to the Franchise Agreement; if required by Cost Cutters transferee franchisee meets Cost Cutters' then-current standards and specifications and agrees to modernize the Franchised Location within 6 months of the transfer date if the store is more than 7 years old and has not been remodeled within the past 5 years; |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 59–65)
What This Means (2024 FDD)
According to Cost Cutters Family Hair Salon's 2024 Franchise Disclosure Document, a franchisee's ability to assign their franchise agreement is subject to certain conditions. Cost Cutters Family Hair Salon maintains the right to approve any transfer initiated by the franchisee; however, this consent will not be unreasonably withheld.
To gain approval for a transfer, a Cost Cutters Family Hair Salon franchisee must meet several requirements. These include paying all outstanding debts to Cost Cutters Family Hair Salon and adhering to Cost Cutters Family Hair Salon's right of first refusal, which means the franchisee must first offer to transfer the business to Cost Cutters Family Hair Salon itself. The franchisee must also complete a written agreement that satisfies Cost Cutters Family Hair Salon. Additionally, the transferee's shareholders must agree to be personally bound to the Franchise Agreement.
Further conditions apply to the transferee. If required by Cost Cutters Family Hair Salon, the transferee franchisee must meet the brand's then-current standards and specifications. If the store is over seven years old and hasn't been remodeled within the past five years, the transferee must agree to modernize the Franchised Location within six months of the transfer date. The transferee must also acquire the Franchised Location, sign a current Franchise Agreement, and pay a deposit for and complete the training program. The franchisee initiating the transfer is responsible for paying the transfer fee. Cost Cutters Family Hair Salon may also require the original franchisee to remain liable for the transferee's obligations if the transferee doesn't meet Cost Cutters Family Hair Salon's net worth requirements.
In the event of the franchisee's death or disability, the franchisee may transfer the Franchise Agreement without first offering it to Cost Cutters Family Hair Salon.