If a Devon Creek franchisee wishes to transfer their interest, what must they promptly do?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
16.6 Franchisor 's Right of First Refusal.
- 16.6.1 If Franchisee wishes to transfer all or part of its interest in the Franchised Business or this Agreement or if a Principal wishes to transfer any ownership interest in Franchisee, pursuant to any bona fide offer to purchase such interest, then Franchisee or such Principal shall promptly notify Franchisor in writing of each such offer, and shall provide such information and documentation relating to the offer as Franchisor may require.
- 16.6.2 Franchisor has the right, exercisable by written notice to Franchisee within ten (10) days after receipt of written notification and copies of all documentation required by Franchisor describing such offer, to buy the interest in this Agreement and the Franchised Business or the Principal's interest in Franchisee for the price and on the terms and conditions contained in the offer, subject to Section 16.6.3.
- 16.6.3 Franchisee further agrees, in the event Franchisor exercises its right of first refusal, notwithstanding anything to the contrary contained in the offer, that (i) Franchisor may substitute cash for any other form of consideration contained in the offer; (ii) at Franchisor 's option, Franchisor may pay the entire purchase price at closing; (iii) Franchisor 's credit will be deemed equal to the credit of any proposed transferee;
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, if a franchisee or a principal wishes to transfer all or part of their interest in the franchised business, the Franchise Agreement, or any ownership interest in the franchisee based on a bona fide offer, they must promptly notify Devon Creek in writing. This notification should include all information and documentation related to the offer that Devon Creek may require.
This clause ensures that Devon Creek maintains control over who becomes a franchisee within their system. By requiring prompt notification and providing detailed information, Devon Creek can assess the potential transferee and ensure they meet the brand's standards and qualifications. This protects the overall quality and consistency of the Devon Creek franchise system.
Devon Creek also retains the right of first refusal, meaning they have the option to purchase the interest themselves on the same terms as the offer. This allows Devon Creek to strategically manage its franchise network and prevent unwanted or unqualified individuals from entering the system. The franchisor has ten days after receiving the notification to exercise this right.
Devon Creek can also substitute cash for any other form of consideration in the offer, pay the entire purchase price at closing, and have its credit deemed equal to any proposed transferee's credit. This provides Devon Creek with significant flexibility and control during a transfer scenario, ensuring the franchisor can act in the best interest of the franchise system.