What constitutes a material event of default under the Crave franchise agreement regarding the Crave Marks?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchising, LLC" as Franchisor. Nothing contained in this Agreement shall require us to remain in the food service business or to offer the same products and services, whether or not bearing the Marks, in the event that we exercise our right to assign our rights in this Agreement.
14.2 Transfer by You
14.2.1 You understand and acknowledge that the rights and duties set forth in this Agreement are personal to you, and that we have granted rights under this Agreement in reliance on the business skill, financial capacity and personal character of you and the Principals. Accordingly, neither you nor any Principal shall sell, assign (including but not limited to by operation of law, such as an assignment under bankruptcy or insolvency laws, in connection with a merger, divorce or otherwise), transfer, convey, give away, pledge, mortgage or otherwise encumber any direct or indirect interest in you, in this Agreement, in the Franchised Business and/or any of the Franchised Business' material assets (other than in connection with replacing, upgrading or otherwise dealing with such assets as required or permitted by this Agreement), without our prior written consent. Any purported assignment or transfer, by operation of law or otherwise, made in violation of this Agreement shall be null and void and shall constitute a material event of default under this Agreement.
14.2.2 If you wish to transfer all or part of your interest in the Franchised Business, any of the Franchised Business' material assets (except as provided in Section 14.2.1 above) or this Agreement,
or if you or a Principal wishes to transfer or permit a transfer of any ownership interest in you, then in each such case (any or all of which are referred to in this Article 14 as a "Restricted Transfer"), transferor and the proposed transferee shall apply to us for our consent. We shall not unreasonably withhold our consent to a Restricted Transfer.
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, a material event of default regarding the Crave Marks occurs if a franchisee attempts to transfer any interest in the franchise agreement, the franchised business, or its material assets without prior written consent from Crave. This includes transfers by operation of law, such as those occurring under bankruptcy or insolvency laws, or in connection with a merger or divorce.
This provision underscores Crave's control over who operates its franchises and protects the brand's integrity by ensuring that only approved individuals or entities manage and represent the brand. The requirement for prior consent allows Crave to assess the transferee's business skills, financial capacity, and personal character, which Crave relies upon when granting franchise rights.
For a prospective Crave franchisee, this means that selling, assigning, or transferring any part of the business or its assets requires explicit approval from Crave. Failure to obtain this approval renders the transfer void and constitutes a serious breach of the franchise agreement, potentially leading to termination of the franchise. This restriction is typical in franchising, as franchisors need to maintain standards and protect their brand by carefully controlling who operates under their name.
Additionally, franchisees must not perform any act that is injurious or prejudicial to the goodwill associated with the Marks and the System. This includes diverting business to competitors. Franchisees also cannot own, maintain, advise, help, invest in, make loans to, be employed by, engage in or have any interest in any restaurant or food service business other than the Franchised Business, which business is of a character and concept similar to the Franchised Business, including a restaurant which offers and sells the same or substantially similar food products.