Does the Deck Medic franchisor's definition of 'transfer' include a merger or consolidation?
Deck_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
| d. | Termination by franchisee | 16.B. | You may terminate the Franchise Agreement if you are in | |----|--------------------------------------------|-----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | | | compliance with its terms, we are in material breach of the Franchise Agreement, and we fail to cure the material breach within 30 days of receiving written notice or, if the breach cannot be cured within 30 days, such period of time that is reasonable to cure the material breach. | | e. | Termination by franchisor without cause | Not applicable | Not applicable. | | f. | Termination by franchisor with "cause" | 16.A. | We can terminate if you are in default of the terms of the Franchise Agreement. | | g. | "Cause" defined-curable defaults | 16.A.(3), 16.A.(4) | You have 10 days to cure a default where you fail to pay any fees and/or obligations due to us and/or to an affiliate of ours or if you fail to pay a supplier without, as determined by us, a legal justification, provided that the foregoing defaults were not intentionally and knowingly in violation of the Franchise Agreement. You will have 30 days to cure a default where you fail to: timely lease a location that we approve for your Deck Medic Business; timely develop and open your Deck Medic Business; operate your Deck Medic Business in accordance with the specifications, standards, and requirements set forth in our Manuals; develop or operate your Deck Medic Business in compliance with all federal, state, and local laws, rules, and regulations, unless, such violation poses a threat to public health or safety; maintain insurance coverage that we require; comply with our standards, systems or specifications as we may designate or as otherwise designated in the operations manual; fail to operate your Deck Medic Business in conformity with our System or otherwise violate the Franchise Agreement, except as to events of default that are not curable. | | h. | "Cause" defined-non-curable defaults | 16.A.(1), 16.A.(2) | The following are defaults that cannot be cured: three or more instances where you commit a curable default, whether or not you timely cured such default in each instance; you intentionally and knowingly refuse to comply with the terms of the Franchise Agreement, and/or the standards specifications, and/or requirements set forth in the operations manual and/or as communicated to you by us from time to time; you intentionally, knowingly, or negligently operate the Franchised Business in violation of applicable laws, rules, and regulations and, in doing so, create a foreseeable, imminent, and/or immediate threat to the health and safety of others; you abandon the Franchised Business; you or your Owners intentionally made a material |
data, information, and/or records that you record and/or submit to us are intentionally misleading or false; you transfer or attempt to transfer the Franchised Business or the ownership interests in your franchise company without our approval; you disclose or permit the disclosure of information contained in the operations manual and/or of confidential information; you or your Owners engage in intentionally dishonest or unethical conduct that impacts our System; you and/or your Owners breach and, if such breach is capable of a cure, fail to timely cure another agreement with us, including the Owner and Spouse Agreement and Guaranty; you and your Owners and managers fail to complete, to our satisfaction, our initial and on-going training programs; you fail to notify us of the misuse of confidential information and you fail to protect same; you misappropriate or misuse the Licensed Marks; you are deemed insolvent, make an assignment for the benefit of creditors, admit in writing your inability to pay debts; are adjudicated bankrupt, file a voluntary bankruptcy petition or have one filed against you, and/or you acquiesce to the appointment of a trustee or receiver, or a court orders one; execution is levied against the Franchised Business; a final judgment is entered against the Franchised Business and is not satisfied within 30 days; you are dissolved; a lawsuit or action is commenced against the Franchised Business to foreclose on a lien on equipment of the Franchised Business and such action is not dismissed after 60 days; real or personal property used by the Franchised Business is sold or levied by a sheriff or other law enforcement officer; and/or you abandon or fail to continuously own and operate the Franchised Business. i. Franchisee's obligations on 6, 17 You must: pay all sums that you owe to us under the termination/non-renewal Franchise Agreement and all other agreements with us; cease owning and operating the Franchised Business; cease representing yourself as a franchisee of ours; permanently cease using and/or accessing the System, the Licensed Marks, our confidential information, the Manuals, the Business Management System, the Business Management System Data, and the System Supplies; return the Manuals and all confidential information to us in the original form provided to you and document the destruction of all electronic files related to same; completely de-identify the location and/or facility associated with the Franchised Business; as requested by us, transfer to us all data, telephone listings, digital media, accounts, web listings and websites associated with the Franchised Business; and abide by the post-termination non-competition covenants and restrictions. j. Assignment of the contract by 14.A. No restriction on our right to assign. franchisor statement or omission in questionnaires submitted to us; the
| k. | "Transfer" by franchisee definition | 14.B. | A transfer means and includes, whether voluntary or involuntary, conditional or unconditional, direct or indirect: (a) an assignment, sale, gift, transfer, pledge or sub franchise; (b) the grant of a mortgage, charge, lien or security interest, including, without limitation, the grant of a collateral assignment; (c) a merger, consolidation, exchange of shares or other ownership interests, issuance of additional ownership interests or securities representing or potentially representing ownership interests, or redemption of ownership interests; and (d) a sale or exchange of voting interests or securities convertible to voting interests, or an agreement granting the right to exercise or control the exercise of the voting rights of any holder of ownership interests or to control the operations or affairs of Franchisee. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 34–39)
What This Means (2024 FDD)
According to Deck Medic's 2024 Franchise Disclosure Document, the definition of 'transfer' by the franchisee includes a merger or consolidation. Specifically, the FDD states that a transfer includes 'a merger, consolidation, exchange of shares or other ownership interests, issuance of additional ownership interests or securities representing or potentially representing ownership interests, or redemption of ownership interests'. This definition is broad and encompasses various changes in ownership or business structure.
This means that if a Deck Medic franchisee were to merge their business with another entity or consolidate their business operations, it would be considered a transfer under the terms of the Franchise Agreement. As a result, the franchisee would need to obtain prior written consent from Deck Medic for the transfer to proceed. Deck Medic has the discretion to grant or withhold this approval.
To gain approval for a transfer, Deck Medic requires the franchisee to fulfill several conditions. These include providing 30 days' prior written notice, ensuring the franchisee is not in default, obtaining the transferee's agreement to be bound by the Franchise Agreement, and securing personal guarantees from the transferee's owners. The franchisee must also sign a general release, transfer the business assets, ensure the transferee completes training, and pay a transfer fee. Deck Medic also retains the right of first refusal to acquire the franchisee's business.
Given these stipulations, prospective Deck Medic franchisees should carefully consider the implications of any potential merger, consolidation, or other ownership changes. It is crucial to understand and comply with the transfer requirements outlined in the Franchise Agreement to avoid any breaches or disputes with Deck Medic. Franchisees should also be aware of Deck Medic's right of first refusal, which could impact their ability to sell or transfer their business to a third party.