Does the Cream franchise agreement allow for involuntary assignments of the franchise?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
Landlord hereby consents, without payment of a fee and without the need for further Landlord consent, to (i) the collateral assignment of Tenant's interest in this Lease to Franchisor to secure Tenant's obligations to Franchisor under the Franchise Agreement; (ii) Franchisor's succeeding to Tenant's interest in the Lease as a result of Franchisor's exercise of rights or remedies under such collateral assignment or as a result of Franchisor's termination of, or exercise of rights or remedies granted in or under, any other agreement between Franchisor and Tenant; and/or (iii) Tenant's, Franchisor's, and/or any other franchisee of Franchisor's assignment of the Lease to another franchisee of Franchisor with whom Franchisor has executed its then-standard Franchise agreement.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
Based on the 2025 FDD, the Cream franchise agreement addresses conditions under which the landlord consents to the assignment of the lease to the franchisor. Specifically, the landlord consents to the collateral assignment of the tenant's (franchisee's) interest in the lease to the franchisor to secure the franchisee’s obligations. This also extends to the franchisor succeeding to the tenant's interest in the lease if the franchisor exercises its rights or remedies under the collateral assignment, or due to termination or exercise of rights under any agreement between the franchisor and the franchisee. Furthermore, the landlord consents to the assignment of the lease to another Cream franchisee.
This arrangement provides Cream with a mechanism to ensure continuity of operations and brand consistency. If a franchisee defaults on their obligations to Cream, the franchisor can step in and take over the lease, either operating the location themselves or transferring it to another franchisee. This protects Cream's interests and maintains the presence of the brand in that location.
For a prospective Cream franchisee, this clause means that their lease can be transferred to Cream or another franchisee under certain circumstances. While this protects the franchisor, it also means the franchisee could lose their location if they fail to meet their obligations under the franchise agreement. It is important for franchisees to understand their obligations and the potential consequences of default, as it could lead to an involuntary assignment of their lease and loss of their business location.