What material terms and conditions of the transfer must the Devon Creek Franchisor approve?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
and collective character, skill, aptitude, attitude, business ability, and financial
- capacity of Franchisee. Thus, no transfer, as hereafter defined, may be made without Franchisor's prior written approval. Franchisor may void any transfer made without such approval.
- 16.3 Transfers by Franchisee. Franchisee shall not directly or indirectly sell, assign, transfer, give, devise, convey or encumber this Agreement or any right or interest herein or hereunder (a "Transfer"), the Franchise, the Franchised Business or any assets thereof (except in the ordinary course of business) or suffer or permit any such assignment, transfer, or encumbrance to occur by operation of law unless it first obtains the written consent of Franchisor. A transfer of any stock in the Franchisee if it is a corporation or a transfer of any ownership rights in Franchisee if it is a partnership, a limited liability company or limited partnership shall be considered a Transfer restricted hereunder. If Franchisee has complied fully with this Agreement and subject to Franchisor's Right of First Refusal set forth in Section 16.6, Franchisor will not unreasonably withhold its consent of a Transfer that meets the following requirements:
- 16.3.1 The proposed transferee and all its principals must have the demeanor and be individuals of good character and otherwise meet Franchisor's then-applicable standards for franchisees.
- 16.3.2 The transferee must have sufficient business experience, aptitude and financial resources to operate the Franchised Business and to comply with this Agreement;
- 16.3.3 The transferee has agreed to complete Franchisor's Initial Training Program to Franchisor's satisfaction;
- 16.3.4 Franchisee has paid all amounts owed to Franchisor and third-party creditors;
- 16.3.5 The transferee has executed Franchisor's then-standard form of Franchise Agreement, which may have terms and conditions different from this Agreement, except that the transferee shall not be required to pay the Initial Franchise Fee;
- 16.3.6 Franchisee and the transferee and each of Franchisee's and the transferee's Principals shall have executed a general release under seal, in a form satisfactory to Franchisor, of any and all claims against Franchisor and Franchisor's officers, directors, shareholders, members and employees in their corporate and individual capacities, including, without limitation, claims arising under federal, state and local laws, rules and ordinances. Franchisee will agree to subordinate any claims Franchisee may have against the transferee to Franchisor, and indemnify Franchisor against all claims brought against Franchisor by the transferee for a period of three (3) years following the transfer;
- 16.3.7 Franchisor has granted written approval of the material terms and conditions of the Transfer, including, without limitation, that the price and terms of payment will not adversely affect the Franchised Business's operation. However, Franchisor's approval of a Transfer is not in any way a representation or warranty of the
- transferee's success or the soundness of transferee's decision to purchase the Franchise on such terms and conditions. Franchisee shall provide Franchisor all proposed transfer documents for Franchisor's review at least thirty (30) days prior to a closing of the proposed Transfer;
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to the 2024 Devon Creek Franchise Disclosure Document, a franchisee cannot transfer their franchise without prior written approval from Devon Creek. If a franchisee transfers any stock in their corporation or any ownership rights in their partnership, limited liability company, or limited partnership, it is considered a restricted transfer that requires franchisor approval. Devon Creek may void any transfer made without their approval.
Devon Creek will not unreasonably withhold consent of a transfer if the franchisee has complied with the agreement and is subject to Devon Creek's Right of First Refusal. The proposed transferee must meet Devon Creek's standards for franchisees, including having good character. The transferee must also have sufficient business experience, aptitude, and financial resources to operate the franchised business and comply with the franchise agreement.
The transferee must agree to complete Devon Creek's Initial Training Program to Devon Creek's satisfaction. The franchisee must have paid all amounts owed to Devon Creek and third-party creditors. The transferee must execute Devon Creek's then-standard form of Franchise Agreement, which may have different terms and conditions from the original agreement, but the transferee will not be required to pay the Initial Franchise Fee. Franchisee must provide Devon Creek all proposed transfer documents for review at least 30 days prior to the transfer's closing.
As a condition of the transfer, the franchisee must pay Devon Creek a transfer fee. The transfer fee is equal to 75% of the then-current initial franchise fee. However, if the transfer is to another Devon Creek franchisee in good standing, the transfer fee is 50% of the then-current initial franchise fee. If the transfer adds a business entity or new shareholder/member to the franchisee entity and does not change management control, the transfer fee is $1,500. If the franchisee or any principal finances any part of the sale price of the transfer, they must agree that all obligations of the transferee under any notes, agreements, or security interests to the franchisee or its principal will be subordinate to the transferee's obligations to Devon Creek.