If a Principal wishes to transfer any ownership interest in the Devon Creek franchisee, what must they 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 Principal wishes to transfer any ownership interest in the Devon Creek franchisee, they must first notify Devon Creek in writing of any bona fide offer to purchase their interest. This notification must include all information and documentation related to the offer that Devon Creek may require.
Devon Creek then has the right of first refusal, meaning they have the option to buy the Principal's interest in the franchisee. Devon Creek must provide written notice to the franchisee within ten days of receiving the notification and all required documentation. If Devon Creek exercises this right, they can purchase the interest at the same price, terms, and conditions as the original offer, subject to a few conditions.
Specifically, Devon Creek can substitute cash for any other form of consideration in the offer, pay the entire purchase price at closing, and their credit will be deemed equal to the credit of any proposed transferee. This right of first refusal allows Devon Creek to maintain control over who becomes involved in their franchise system and ensures that any new owners meet their standards.