Can Costa Vida Fresh Mexican Grill disapprove a transfer based on burdensome terms?
Costa_Vida_Fresh_Mexican_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
- (ix) we must not have disapproved the material terms and conditions of the Transfer (including the price and terms of payment and the amount to be financed by the transferee in connection with the Transfer, which shall not in any event exceed seventy-five percent (75%) of the purchase price for the assets or stock to be transferred) on the basis that they are so burdensome as to be likely, in our reasonable judgment, to adversely affect the transferee's operation of Costa Vida Restaurants or its compliance with its Franchise Agreements, this Agreement, and any other agreements being transferred;
Source: Item 23 — RECEIPTS (FDD pages 67–282)
What This Means (2025 FDD)
According to Costa Vida Fresh Mexican Grill's 2025 Franchise Disclosure Document, Costa Vida Fresh Mexican Grill can disapprove a transfer if the terms and conditions, including price and payment terms, are deemed too burdensome. Specifically, if the amount to be financed by the transferee exceeds 75% of the purchase price, Costa Vida Fresh Mexican Grill can disapprove the transfer. This is based on their reasonable judgment that such terms could adversely affect the transferee's ability to operate the Costa Vida Restaurants or comply with the franchise agreements.
This provision protects Costa Vida Fresh Mexican Grill from transfers that could lead to financial instability for the new franchisee, which could in turn harm the brand. By setting a limit on the amount that can be financed, Costa Vida Fresh Mexican Grill aims to ensure that the transferee has sufficient capital to successfully manage the franchise.
For a prospective franchisee, this means that if you plan to sell your Costa Vida Fresh Mexican Grill franchise, the terms of the sale must be reasonable and not place an undue financial burden on the buyer. If the financing terms are too aggressive, Costa Vida Fresh Mexican Grill has the right to step in and disapprove the transfer to protect the overall health of the franchise system. This clause aims to balance the franchisee's right to sell with the franchisor's need to maintain a stable and successful network of operators.