Under what circumstances does the right of first refusal apply to a Counselor Realty franchisee?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
the requirements of this Agreement and then-current System standards.
9.6 Right of First Refusal. If you (or any subsequent Franchisee) propose a transfer governed by this Article 9, in whole or in part, to any third party in response to a bona fide offer from such third party, you shall first offer to sell to Counselor your said interest as provided herein. You shall obtain from the third party offeror and deliver to us a statement in writing, signed by the offeror and by you of all of the terms of the offer. Counselor has 30 days from its receipt of the statement to accept the offer by delivering written notice of acceptance to you. The acceptance shall be on the same price and terms stated in the third party offer except that Counselor may confer with you and the proposed transferee and negotiate the terms of the proposed transfer without thereby impairing the right of first refusal, and Counselor may substitute cash in the fair market value of any non-cash consideration offered by the third party. If Counselor fails to accept the offer within the 30-day period, you shall be free for 60 days after such period to effect the disposition described in the statement delivered to Counselor provided that such transfer is in accordance with Article 9 of this Agreement; but you shall effect no other or subsequent sale or assignment of this Agreement or the business conducted hereunder without first offering the same to Counselor in accordance with this paragraph.
10. RESOLUTION OF DISPUTES.
- 10.1 Arbitration. Except as provided below, any dispute arising under or in relation to this Agreement shall be resolved by binding arbitration by the National Center for Dispute Settlement, under its rules for expedited commercial arbitration, in Minneapolis, Minnesota. Each claim or controversy will be arbitrated by Franchisee on an individual basis, and will not be consolidated in any arbitration action with the claim of any other franchisee. The award of the arbitrators is final and binding on all parties. The arbitrators may issue appropriate orders as well as award monetary (but not exemplary or punitive) damages. The prevailing party will be entitled to recover its costs including its reasonable attorneys' fees. We may sue to collect money owed to us, to protect or enforce our rights in the Marks, or to compel inspections or audits.
- 10.2 Injunctive Relief. Your breach of this Agreement could cause irreparable damage to Counselor or to other franchisees. Therefore, upon a breach or threatened breach of any of the terms of this Agreement, we are entitled to an immediate injunction restraining such breach and/or a decree of specific performance, pending arbitration or adjudication, without bond, or having to show or prove any actual damage, and without regard to the availability of an adequate remedy at law.
11. TERMINATION.
- (a) We may terminate for good cause if you perform any intentional, material, repeated or continuous breach of this Agreement. We must provide you with 60 days' written notice of termination, specifying the cause for termination. Except as provided below, you shall have 30 days from delivery of notice to cure the breach (except in the case of non-payment of sums due, in which case you shall have seven days to cure the breach). If you fail to do so this Agreement shall terminate on expiration of the 60-day notice period.
- (b) This Agreement shall terminate immediately upon delivery of notice to you if: (i) you misrepresent or omit material information on your application; or (ii) you fail to locate a suitable site or open the Office for business within the time required under section 1.2 of this Agreement; or (iii) you become insolvent or bankrupt; or (iv) you transfer or attempt to transfer this Agreement without our consent; or (v) you abandon this Agreement, the Office or the Business; or (vi) you (or a principal officer, director, or partner of Franchisee) are convicted of, or plead guilty or no contest to, any charge of violation of any law relating to the Office (including any Additional Office or Extension Office) and
Business, or of any felony;
Source: Item 22 — CONTRACTS (FDD page 32)
What This Means (2025 FDD)
According to Counselor Realty's 2025 Franchise Disclosure Document, the right of first refusal applies in two primary scenarios: when a franchisee proposes a transfer of their franchise and when Counselor Realty intends to offer a territory opportunity near an existing Extension Office to another franchisee.
Regarding franchise transfers, if a Counselor Realty franchisee receives a legitimate offer from a third party to purchase their interest in the franchise, the franchisee must first offer to sell that interest to Counselor Realty. The franchisee is required to provide Counselor Realty with a written statement detailing all terms of the third-party offer. Counselor Realty then has 30 days to accept the offer on the same terms, with the option to substitute cash for non-cash considerations. If Counselor Realty declines the offer, the franchisee is free to proceed with the transfer to the third party within the subsequent 60 days, provided the transfer complies with the franchise agreement. This right of first refusal ensures that Counselor Realty maintains control over who enters the franchise system.
Concerning Extension Offices, if Counselor Realty plans to license another party to establish a Counselor Realty office in a territory that includes the location of a franchisee's Extension Office, the existing franchisee has a right of first refusal for that territory opportunity. Counselor Realty will provide written notice of the territory opportunity, and the franchisee has 30 days to express their interest in participating. If the franchisee does express interest, Counselor Realty may impose terms and conditions for their participation, including the execution of a new franchise agreement. This provision allows existing franchisees with Extension Offices the first chance to expand their territory before Counselor Realty licenses it to someone else.
However, the right of first refusal does not apply to all ownership changes. Specifically, it does not apply to a transfer of ownership interest in the franchisee entity (or any owner of the franchisee) if the transfer does not result in a change of control, the franchisee provides Counselor Realty with 30 days written notice, and the transferee executes a guaranty. This exception allows for some flexibility in ownership structure without triggering Counselor Realty's right of first refusal, as long as Counselor Realty is properly notified and the financial obligations are guaranteed.