Is a Counselor Realty franchisee allowed to transfer the franchise agreement without consent?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
proximate consequences of our negligence.
9. TRANSFER OF FRANCHISE.
- 9.1 Transfer Standards. You agree not to change or allow a change, directly or indirectly, in the ownership or Control of (i) your interest in this Agreement, (ii) the Office, any Additional Office, any Extension Office or Business, (iii) a majority of the assets of the Office, any Additional Office, any Extension Office or Business, or (iv) if Franchisee is an entity, any ownership interest in, or Control of, Franchisee or any direct or indirect owner of Franchisee (each, a "transfer"), without having first tendered to us the right of first refusal to acquire this Agreement, such assets or such interests in accordance with Section 9.6 and, if we do not exercise such right, without our consent and without satisfaction of the conditions stated below. You and your transferee must follow the procedures set forth in Section 9.2, below, and the transferee must sign the then-current form of Counselor Franchise Agreement for the unexpired term, unless the Franchisee is an entity and the transfer is a transfer of an ownership interest in Franchisee or any owner of Franchisee. We will consent to a transfer if the conditions specified in this Agreement in our opinion are satisfied and the transferee in our opinion is qualified to operate the Business in compliance with that Agreement. Notwithstanding anything contained herein to the contrary, Counselor's consent will not be required for, and the right of first refusal set forth in Section 9.6 will not apply to, a transfer described in clause (iv) of the first sentence of this Section 9.1 if (x) such transfer (in a single transaction or series of related transactions) will not result in a change in Control of Franchisee or such direct or indirect owner of Franchisee, (y) you provide Counselor with written notice of such transfer, together with such other information concerning such transfer and transferee as we may require, at least thirty (30) days prior to the consummation of such transfer, and (z) if such transfer is a transfer of an ownership interest in Franchisee, such transferee executes the guaranty attached to this Agreement and delivers such guaranty to Counselor within ten (10) days of such transfer. For purposes of this Article 9, "Control" means, with respect to the applicable person or entity, ownership or control, directly or indirectly, of a majority of the voting ownership of such person or entity or the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person or entity, by contract or otherwise.
- 9.2 Other Conditions to Transfer. You must apply for our consent by submitting written notice of the pending transfer, with a complete application, signed by you and by the proposed transferee, and payment of the transfer fee, at least 60 days before the proposed transfer date. The transfer fee is $2,000 and applies to all transfers (excluding transfers described in, and in accordance with, the second to last sentence of Section 9.1). We may specifically withhold consent if: (i) you do not pay all amounts you owe to Counselor or its affiliates or to your suppliers; (ii) you (or the transferee) do not complete the repair, maintenance or upgrade of the Business' facility, fixtures, equipment, and signage to then-current System standards; or (iii) all shareholders or owners of the transferee do not execute the guaranty of the new Agreement.
- 9.3 Franchisee Death or Disability. Your death, disability or incapacity (or of a principal officer, director or partner of Franchisee) is also a "transfer." Your executor, heir or legal representative (or the corporation or partnership, if an entity) must apply within 60 days of the death or incapacity for our consent to transfer this Agreement and satisfy the other conditions above.
- 9.4 Transfer by Franchi
Source: Item 22 — CONTRACTS (FDD page 32)
What This Means (2025 FDD)
According to the 2025 FDD, a Counselor Realty franchisee generally cannot transfer their franchise agreement without first obtaining consent from Counselor Realty. The franchisee must first offer Counselor Realty the right of first refusal to acquire the agreement. If Counselor Realty does not exercise this right, the franchisee must then seek consent for the transfer, adhering to specific conditions outlined in the agreement.
However, there is an exception where Counselor Realty's consent is not required for certain transfers involving ownership interests within the franchisee's entity, provided that the transfer does not result in a change of control. In this case, the franchisee must give Counselor Realty written notice at least 30 days before the transfer, along with any required information about the transfer and transferee. If the transfer involves an ownership interest in the franchisee, the transferee must execute a guaranty and deliver it to Counselor Realty within 10 days of the transfer.
To initiate a transfer, the Counselor Realty franchisee must submit a written notice of the pending transfer, along with a complete application signed by both the franchisee and the proposed transferee, at least 60 days before the intended transfer date. A transfer fee of $2,000 is applicable to all transfers, except those that meet the conditions for the exception mentioned above where consent is not required. Counselor Realty may withhold consent if the franchisee has outstanding debts to Counselor Realty or its affiliates, if the business's facilities do not meet the current system standards, or if all owners of the transferee do not execute the guaranty of the new agreement.
In the event of the death, disability, or incapacity of the Counselor Realty franchisee (or a principal officer, director, or partner), the executor, heir, or legal representative must apply for consent to transfer the agreement within 60 days, meeting the other conditions for transfer. Counselor Realty, on the other hand, retains the right to transfer its interest in the agreement at its own discretion.