Under what circumstances can Crave refuse a transfer of ownership of a franchise?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
- (g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause.
This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise.
Good cause shall include, but is not limited to:
(i) Failure of the proposed transferee to meet the franchisor's then-current reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, Crave can refuse a transfer of ownership of a franchise for good cause. Good cause includes, but is not limited to, the proposed transferee's failure to meet Crave's current qualifications or standards, the proposed transferee being a competitor of Crave, or the proposed transferee's unwillingness to agree in writing to comply with all lawful obligations. Additionally, Crave can refuse a transfer if the franchisee or proposed transferee fails to pay any sums owed to Crave or cure any default in the franchise agreement at the time of the proposed transfer.
Crave also agrees not to unreasonably withhold consent to a sale, assignment, or transfer, provided certain conditions are met. These conditions include the transferee assuming all obligations under the franchise documents, paying all debts owed to Crave or its affiliates, and the franchisee not being in default. Crave must also be reasonably satisfied that the transferee meets all requirements for new multi-unit developers, including good reputation, business acumen, operational ability, management skills, and financial strength. The transferee must also execute Crave's standard agreements for multi-unit developers.
Furthermore, the franchisee must execute a general release of claims against Crave, its officers, directors, employees, and stockholders. The franchisee also agrees to subordinate any claims against the transferee to Crave and indemnify Crave against claims by the transferee relating to misrepresentations in the transfer process, excluding those made by Crave in the Franchise Disclosure Document. A transfer fee of $5,000 is required to cover Crave's costs in effecting the transfer and providing training to the transferee.
In practical terms, a prospective Crave franchisee needs to be aware of these conditions for transfer. If they plan to sell their franchise in the future, they must ensure that the potential buyer meets Crave's standards and is willing to comply with all obligations. The franchisee must also remain in good standing with Crave, fulfilling all financial and contractual obligations. Failing to meet these conditions could result in Crave refusing the transfer, potentially hindering the franchisee's ability to sell the business.