What agreement terms must a Crisp & Green transferee agree to, including royalty and advertising contributions?
Crisp_Green Franchise · 2024 FDDAnswer from 2024 FDD Document
(i) we must not have disapproved the material terms and conditions of such transfer (including the price and terms of payment) on the basis that they are so burdensome as to be likely, in our judgment, to adversely affect the transferee's operation of the Franchised Restaurant or its compliance with its franchise agreements and any development agreements;
(j) if you (or any of your Principal Owners or Affiliates) finance any part of the sale price of the transferred interest, you and/or your Principal Owners or Affiliates must agree that all
obligations of the transferee, and security interests reserved by any of them in the assets of the Franchised Restaurant, will be subordinate to the transferee's obligations to pay all amounts due us and our Affiliates and to otherwise comply with this Agreement or the new franchise agreement executed by the transferee;
(k) you (and your Immediate Family) will not, for two (2) years beginning on the transfer's effective date, engage in any of the activities proscribed in Section 16.03 below; and
(l) you and your Principal Owners and Affiliates must execute such other documents and do such other things as we may reasonably require to protect our rights under this Agreement and under any development agreement.
13.03 Effect of Approval.
Our approval of a Transfer of the Franchise does not constitute: (a) a representation as to the fairness of the terms of any agreement or arrangement between you or your Principal Owners and the transferee or as to the prospects of success of the Franchised Restaurant by the transferee; or (b) a release of you and your Principal Owners, a waiver of any claims against you or your Principal Owners or a waiver of our right to demand the transferee's exact compliance with this Agreement.
Any approval shall apply only to the specific Transfer of the Franchise being proposed and shall not constitute an approval of, or have any bearing on, any other Transfer of the Franchise.
- 13.04 Special Transfers.
Neither Section 13.06 nor Section 13.02(h) or (j) shall apply to any Transfer of the Franchise to any member of your Immediate Family or the Immediate Family of a then current Principal Owner of Franchisee (if you are an Entity).
Source: Item 23 — RECEIPTS (FDD pages 66–252)
What This Means (2024 FDD)
Based on the 2024 Crisp & Green Franchise Disclosure Document, if a franchisee transfers their franchise to a new owner, several conditions must be met to protect Crisp & Green's interests. The franchisor must not disapprove of the transfer's material terms, especially if they believe the terms could negatively impact the new owner's ability to run the franchise or comply with the franchise agreement. If the seller of the franchise provides financing to the buyer, the seller must agree that the buyer's obligations to Crisp & Green take priority over any financial claims the seller has on the franchise assets. This ensures that Crisp & Green's royalties and other payments are secured. The original franchisee (and their immediate family) also can't engage in any competitive activities for two years after the transfer. Finally, both the seller and their primary owners must sign any additional documents Crisp & Green deems necessary to protect their rights under the franchise and any development agreements.
Crisp & Green's approval of a franchise transfer doesn't mean they guarantee the fairness of the sale terms between the seller and buyer, nor does it guarantee the new owner's success. The approval also doesn't release the original franchisee from any past obligations or waive Crisp & Green's right to demand strict compliance with the franchise agreement from the new owner. Each transfer is evaluated individually and doesn't set a precedent for future transfers.
However, these transfer restrictions are relaxed for transfers within the franchisee's immediate family. Specifically, the requirements regarding disapproval of transfer terms and subordination of financing do not apply to transfers to immediate family members. The FDD excerpts provided do not specify the exact royalty or advertising contribution rates that a transferee would be subject to; this information would likely be detailed in the franchise agreement itself, which the transferee would need to review and agree to.