Can Devon Creek assign its option to purchase the franchisee's assets to another party?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
16. TRANSFERS
16.1 Transfers by Franchisor.
- 16.1.1 Franchisor shall have the right to assign this Agreement, and all of Franchisor's rights and privileges hereunder, to any person, firm, corporation or other entity, without Franchisee's permission or prior knowledge, provided that, with respect to any assignment resulting in the subsequent performance by the assignee of Franchisor's obligations, the assignee shall expressly assume and agree to perform Franchisor's obligations hereunder.
Specifically, and without limitation to the foregoing, Franchisee expressly affirms and agrees that Franchisor may: (i) sell Franchisor's assets and Franchisor's rights to the Marks and the System outright to a third party; (ii) engage in a public or private placement of some or all of Franchisor's securities; (iii) merge, acquire other corporations, or be acquired by another corporation, including competitors; (iv) undertake a refinancing, recapitalization, leveraged buy-out or other economic or financial restructuring; and (v) with regard to any or all of the above sales, assignments and dispositions, Franchisee expressly and specifically waives any claims, demands or damages arising from or relating to the loss of association with or identification of Franchisor.
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, Devon Creek has the right to assign the Franchise Agreement to another party without the franchisee's permission or prior knowledge. This includes all of Devon Creek's rights and privileges under the agreement. However, if the assignment results in the assignee performing Devon Creek's obligations, the assignee must expressly assume and agree to perform those obligations.
Specifically, Devon Creek can sell its assets and rights to the Marks and the System to a third party. They can also engage in public or private placements of securities, merge with or acquire other corporations (or be acquired by another corporation, including competitors), and undertake refinancing or other financial restructuring. The franchisee waives any claims, demands, or damages related to the loss of association with Devon Creek due to these actions.
This clause means that a Devon Creek franchisee could find themselves operating under a completely different franchisor or business structure. While the new entity would be obligated to fulfill Devon Creek's original commitments, the franchisee might experience changes in management, brand strategy, or support systems. It is fairly common in franchising for the franchisor to retain the right to transfer the agreement, but franchisees should carefully consider the potential implications for their business.