What constitutes a material event of default under the Crave franchise agreement regarding the transfer of any interest?
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.
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 occurs if a franchisee attempts to sell, assign, transfer, convey, give away, pledge, mortgage, or encumber any direct or indirect interest in the franchise without Crave's prior written consent. 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 restriction is in place because Crave has granted rights under the agreement based on the business skill, financial capacity, and personal character of the franchisee and its principals. Therefore, any transfer without Crave's consent is considered a violation of the agreement.
Additionally, the Crave franchise agreement states that any attempt to assign the agreement before at least 25% of the franchised businesses to be constructed are opened or under construction is also deemed an event of default. This provision ensures that franchisees are committed to developing a substantial portion of their agreed-upon franchise locations before attempting to transfer their rights.
These transfer restrictions are designed to protect Crave's Development Rights, the System, and the Marks, as well as the brand's reputation and image. They also aim to protect Crave, its multi-unit developers, and other franchisees by ensuring that any new owners meet the franchisor's standards and are capable of maintaining the brand's integrity.