Does Deck Medic have the right to reject or approve a proposed transfer of equity or ownership interests?
Deck_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
erwise in violation of this Agreement including, but not limited to this Article 14.B. shall constitute a breach of this Agreement and shall convey to the transferee no rights or interests in this Agreement; and
- (5) In the event of a Transfer of this Agreement that is approved by Franchisor, Franchisee shall not be relieved of Franchisee's obligations under this Agreement whether said obligations accrued and/or arose prior to and/or after the date of Transfer.
14.C. CONDITIONS FOR APPROVAL OF TRANSFER
Provided Franchisee and each Owner and Spouse, respectively, are in substantial compliance with this Agreement and the Ancillary Agreements, and Franchisor does not elect to exercise Franchisor's right of first refusal as set forth in Article 14.F. below, Franchisor shall not unreasonably withhold its approval of a Transfer by Franchisee or an Owner. The proposed transferee (including such assignee's owner(s) and spouse(s) if the proposed transferee is a Corporate Entity) must be of good moral character, have sufficient business experience, aptitude and financial resources to own and operate a Deck Medic Business, and otherwise meet Franchisor's then applicable standards for franchisees as determined by Franchisor in its sole, but reasonable discretion. Furthermore, the proposed transferee and the proposed transferee's owners and spouses may not own or operate, or intend to own or operate, a Competitive Business. Franchisee agrees that Franchisor may condition approval of a Transfer upon Franchisee's satisfaction (either before, or contemporaneously with, the effective date of the Transfer) of the following:
- (1) Franchisee must provide written notice to Franchisor of the proposed Transfer of this Agreement at least 30 days prior to the Transfer, and Franchisee must have also satisfied the obligations set forth in Article 14.F. below;
- (2) All accrued monetary obligations of Franchisee and all other outstanding obligations to Franchisor and/or Franchisor's affiliates under this Agreement and the Ancillary Agreements must be satisfied in a timely manner, and Franchisee must satisfy all trade, supplier, and vendor accounts and other debts, of whatever nature or kind, in a timely manner;
- (3) Franchisee, each Owner, and each Spouse must not be in default or material breach of this Agreement or the Ancillary Agreements;
- (4) The transferee shall be bound by all terms and conditions of this Agreement, and each owner of the transferee and their respective spouses shall personally execute the Franchise Owner and Spouse Agreement and Guaranty in the form attached to this Agreement as Exhibit 1;
- (5) All obligations of Franchisee under this Agreement and the Ancillary Agreements shall be assumed by the transferee, and each individual owner of transferee, and their respective spouses in a manner satisfactory to Franchisor;
- (6) Franchisee, each Owner, and each Spouse must execute the General Release attached to this Agreement as Exhibit 5 releasing Franchisor, Franchisor's affiliates and Franchisor's past and present officers, directors, shareholders, members, partners, agents, representatives, independent contractors, servants and employees, of any and all claims against Franchisor for matters arising
on, or before, the effective date of the Transfer;
- (7) If the proposed Transfer includes or entails the Transfer of this Agreement, substantially all of the assets of the Franchised Business, a controlling interest in Franchisee, or is one of a series of Transfers which in the aggregate Transfers substantially all of the assets of the Franchised Business or a controlling interest in Franchisee, then, at the election of Franchisor and upon notice from Franchisor to Franchisee, the transferee may be required to execute (and/or, upon Franchisee's request, shall cause all interested parties to execute) for a term ending on the expiration date of the original Term of this Agreement, the then current standard form Franchise Agreement offered to new franchisees of Deck Medic Businesses and any other agreements as Franchisor requires. Such agreements shall supersede this Agreement and its associated agreement in all respects, and the terms of Franchisor's then current agreements may differ from the terms in this Agreement, provided that such agreements shall provide for the same Royalty Fee, Advertising Contributions, and all other financial or monetary obligations established in this Agreement;
Source: Item 23 — RECEIPTS (FDD pages 43–228)
What This Means (2024 FDD)
According to Deck Medic's 2024 Franchise Disclosure Document, Deck Medic has specific rights regarding the transfer of ownership interests in a franchise. Deck Medic does not unreasonably withhold approval of a transfer by a franchisee or owner, provided they are in substantial compliance with the franchise agreement and ancillary agreements, and Deck Medic does not exercise its right of first refusal. However, the proposed transferee must be of good moral character, possess sufficient business experience, aptitude, and financial resources to operate the Deck Medic business, and meet Deck Medic's standards for franchisees. Additionally, the transferee and their owners/spouses cannot own or operate a competitive business. Deck Medic approval of a transfer does not mean that future transfers are approved or that the requirement for approval is waived. The transfer must comply with all applicable laws, and the transfer of the franchised business, lease, and assets must occur in conjunction with an approved transfer of the franchise agreement. Deck Medic's consent to a transfer does not waive any claims it may have against the franchisee or waive its right to demand strict compliance with the agreement by the transferee.
Deck Medic also has a right of first refusal. If a franchisee or owner wants to transfer their interest, they must obtain a written offer from a purchaser and submit it to Deck Medic. Deck Medic then has 30 days to decide whether to purchase the interest on the same terms as the offer, with the option to substitute cash for any proposed payment method. If Deck Medic decides to purchase the interest, the franchisee or owner must sell it to them, and Deck Medic has an additional 60 days to prepare for closing. If Deck Medic does not exercise its right of first refusal, the franchisee or owner can complete the transfer to the purchaser, provided they comply with all other terms of the transfer agreement. However, if the sale is not completed within 120 days or there is a material change in terms, Deck Medic has the right of first refusal again. This right of first refusal does not apply to transfers made to a wholly-owned corporate entity.
These stipulations surrounding transfer of ownership are typical in franchising, as they allow Deck Medic to maintain standards and protect the brand. A prospective franchisee should carefully consider these conditions, as they could impact the future sale or transfer of their Deck Medic franchise. It is important to understand the criteria Deck Medic uses to evaluate potential transferees and the circumstances under which Deck Medic might exercise its right of first refusal.