Is a transfer of the Crawlspace Medic franchise by devise or inheritance subject to the conditions for transfers outlined in Article 16?
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 of law unless it first obtains the written consent of Franchisor. A transfer of any stock in the Franchisee if it is a corporation or a transfer of any ownership rights in Franchisee if it is a partnership, a limited liability company or limited partnership shall be considered a Transfer restricted hereunder. If Franchisee has complied fully with this Agreement and subject to Franchisor's Right of First Refusal set forth in Section 16.6, Franchisor will not unreasonably withhold its consent of a Transfer that meets the following requirements:
- 16.3.1. The proposed transferee and all its principals must have the demeanor, and be individuals of good character and otherwise meet Franchisor's thenapplicable standards for franchisees.
- 16.3.2. The transferee must have sufficient business experience, aptitude and financial resources to operate the Franchised Business and to comply with this Agreement;
- 16.3.3. The transferee has agreed to complete Franchisor's Initial Training Program to Franchisor's satisfaction;
- 16.3.4. Franchisee has paid all amounts owed to Franchisor and third-party creditors;
- 16.3.5. The transferee has executed Franchisor's then-standard form of Franchise Agreement, which may have terms and conditions different from this Agreement, except that the transferee shall not be required to pay the Initial Franchise Fee;
- 16.3.6.
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2024 FDD)
According to the 2024 Crawlspace Medic Franchise Disclosure Document, a transfer of the franchise agreement by devise or inheritance is subject to the conditions for transfers outlined in Article 16. Specifically, Article 16.3 states that a franchisee cannot directly or indirectly transfer the agreement or any rights without the franchisor's written consent. This includes transfers that occur 'by operation of law,' which would encompass transfers via devise (a will) or inheritance. Therefore, the standard transfer conditions apply even in cases of death or incapacitation of the franchisee.
This means that if a Crawlspace Medic franchisee wishes to pass the franchise to an heir, the heir must be approved by Crawlspace Medic. The prospective transferee must meet the franchisor's standards for franchisees. The transferee needs to have sufficient business experience, aptitude, and financial resources to operate the Crawlspace Medic franchise and comply with the franchise agreement. The transferee may also need to complete the initial franchise training program to the franchisor's satisfaction.
Furthermore, the FDD states that a transfer fee may be required. However, the transfer fee is waived for a transfer to a spouse, parent, or child upon death or permanent disability of the franchisee or franchisee's principal. This provides a notable exception to the transfer fee requirement, easing the burden on immediate family members inheriting the franchise. The entity formation documents must also state that the issuance and assignment of any interest in the franchisee are restricted by Article 16, and transfers of interests in the franchisee are subject to the terms of the agreement governing transfers.
In summary, while Crawlspace Medic franchise agreements can be transferred via devise or inheritance, these transfers are not automatic. The franchisor retains the right to vet and approve the new franchisee, ensuring they meet the brand's standards. However, Crawlspace Medic waives the transfer fee for transfers to immediate family members in the event of death or permanent disability, which is a beneficial provision for franchisees and their families.