If a Crawlspace Medic franchisee becomes insolvent, what happens to their franchise agreement?
Crawlspace_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
ransfer, as hereafter defined, may be made without Franchisor's prior written approval. Franchisor may void any transfer made without such approval.
- 16.3. Transfers by Franchisee. Franchisee shall not directly or indirectly sell, assign, transfer, give, devise, convey or encumber this Agreement or any right or interest herein or hereunder (a "Transfer"), the Franchise, the Franchised Business or any assets thereof (except in the ordinary course of business) or suffer or permit any such assignment, transfer, or encumbrance to occur by operation o
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2024 FDD)
Based on the 2024 Crawlspace Medic Franchise Disclosure Document, the franchise agreement is personal to the franchisee and their existing principals. Item 16.3 states that franchisees cannot directly or indirectly sell, assign, transfer, give, devise, convey, or encumber the agreement or any rights or interests without the franchisor's written consent. This restriction extends to transfers occurring by operation of law.
This means that if a Crawlspace Medic franchisee becomes insolvent and the franchise agreement is considered an asset subject to transfer or encumbrance through legal proceedings (like bankruptcy), the franchisor's consent is still required. If the franchisee fails to obtain this consent, Crawlspace Medic has the right to void the transfer.
This provision protects Crawlspace Medic by ensuring they maintain control over who operates a franchise under their brand. A prospective franchisee should carefully consider this restriction, as it limits their ability to transfer the franchise in various circumstances, including financial distress. It is advisable to discuss potential scenarios with the franchisor to understand their criteria for approving a transfer in such situations.