What constitutes a 'transfer' by a Crab N Spice franchisee?
Crab_N_Spice Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in franchise | Summary |
|---|---|---|
| or other agreement | ||
| k. “Transfer” by | FA: Article 1 | For you (or any owner of your business) to |
| franchisee - defined | ||
| MUDA: Background | voluntarily or involuntarily transfer, sell, or | |
| Statement | dispose of, in any single or series of transactions, (i) substantially all of the assets of the business, (ii) the franchise agreement, (iii) direct or indirect ownership interest of more than 25% of the business, or (iv) control of the business. | |
| l. Franchisor’s approval of | FA: § 15.2 | No transfers without our approval. No transfers without our approval. |
| transfer by franchisee | MUDA: § 7 | |
| m. Conditions for | FA: § 15.2 | Pay transfer fee; buyer meets our standards; |
| franchisor’s approval of | ||
| transfer | ||
| MUDA: none | buyer is not a competitor of ours; buyer and its owners sign our then-current franchise agreement and related documents (including personal guaranty); you’ve made all payments to us and are in compliance with all contractual requirements; buyer completes training program; you sign a general release; business complies with then-current system specifications (including remodel, if applicable). | |
| n. Franchisor’s right of | If you want to transfer your business (other than | |
| first refusal to acquire | ||
| franchisee’s business | to your spouse, sibling, or child), we have a right of first refusal. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 32–35)
What This Means (2024 FDD)
According to Crab N Spice's 2024 Franchise Disclosure Document, a 'transfer' occurs when a franchisee (or any owner of the business) voluntarily or involuntarily transfers, sells, or disposes of substantially all of the assets of the business, the franchise agreement itself, a direct or indirect ownership interest of more than 25% of the business, or control of the business. This can happen in a single transaction or a series of transactions.
This definition is important for prospective Crab N Spice franchisees because it outlines the circumstances under which they would need to seek approval from Crab N Spice to transfer their business. Transferring the business without approval can result in a breach of the franchise agreement. The broad scope of the definition, including transfers of assets, the agreement, ownership interest, or control, means franchisees must be diligent in seeking franchisor approval for significant changes in their business structure or ownership.
Crab N Spice requires its approval for any transfer. If a franchisee wants to transfer their business to someone other than a spouse, sibling, or child, Crab N Spice retains the right of first refusal. This means that Crab N Spice has the first option to purchase the business under the same terms offered by the prospective buyer.
To gain approval for a transfer, the franchisee must pay a transfer fee, ensure the buyer meets Crab N Spice's standards and is not a competitor, have the buyer and their owners sign the then-current franchise agreement and related documents (including a personal guaranty), ensure all payments to Crab N Spice are current and all contractual requirements are met, have the buyer complete the training program, have the franchisee sign a general release, and ensure the business complies with the then-current system specifications, including any required remodeling.