What claims must the transferor subordinate to Crawlspace Medic during a transfer?
Crawlspace_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
--------------------------------| | | | Franchise | | | | Provision | Agreement | Summary | | m. | Conditions for franchisor approval of a transfer | Section 16.3 and 16.4 | Conditions include: our decision not to exercise our right of first refusal; transferee meets our then-current standards for qualifying franchisees; transferee signs our then-current form of Franchise Agreement, which may have materially different terms from your Franchise Agreement; transferee successfully complete our Initial Training Program; you have paid us and third-party creditors all amounts owed; you and the transferee sign a General Release in the form of Exhibit C to the Franchise Agreement; you shall subordinate any claims you have against the transferee to us; you will indemnify us for a period of 3 years following the transfer; our approval of the material terms and conditions of the transfer; payment of a transfer fee equal to sixty percent (60%) of the then current franchise fee for a transfer to an individual or entity that is new to the brand, or forty percent (40%) of the then current franchise fee for a transfer to an existing owner within the system, or $1,500 for a transfer between existing owner or adding a new shareholder that does not change the majority ownership, or no payment for a transfe
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 33–38)
What This Means (2024 FDD)
According to Crawlspace Medic's 2024 Franchise Disclosure Document, a franchisee who is transferring their franchise must subordinate any claims they have against the transferee to Crawlspace Medic. This requirement is one of several conditions that must be met for Crawlspace Medic to approve the transfer.
This means that if the franchisee has any financial or legal claims against the person or entity buying the franchise, Crawlspace Medic's claims take priority. Practically speaking, if the transferee owes both the franchisee and Crawlspace Medic money, Crawlspace Medic will be paid first. This protects Crawlspace Medic's financial interests during the transfer process.
In addition to subordinating claims, the franchisee must also ensure the transferee meets Crawlspace Medic's standards for franchisees, that the transferee signs the current Franchise Agreement, and that the franchisee has paid all outstanding amounts owed to Crawlspace Medic and third-party creditors. Both the franchisee and the transferee must sign a General Release, and the franchisee must indemnify Crawlspace Medic for three years following the transfer. The franchisee will also need to gain approval of the transfer's material terms and conditions from Crawlspace Medic and pay a transfer fee.