Does Dryer Vent Squad have the right of first refusal to acquire a franchisee's business?
Dryer_Vent_Squad Franchise · 2024 FDDAnswer from 2024 FDD Document
| j. | Assignment of the contract by | 14.A. | No restriction on our right to assign. | |----|-----------------------------------------------------|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | franchisor | | | | k. | "Transfer" by franchisee definition | 14.B. | A transfer means and includes, whether voluntary or involuntary, conditional or unconditional, direct or indirect: (a) an assignment, sale, gift, transfer, pledge or sub-franchise; (b) the grant of a mortgage, charge, lien or security interest, including, without limitation, the grant of a collateral assignment; (c) a merger, consolidation, exchange of shares or other ownership interests, issuance of additional ownership interests or securities representing or potentially representing ownership interests, or redemption of ownership interests; and (d) a sale or exchange of voting interests or securities convertible to voting interests, or an agreement granting the right to exercise or control the exercise of the voting rights of any holder of ownership interests or to control the operations or affairs of Franchisee. | | l. | Franchisor's approval of transfer by franchisee | 14.B. | Transfers require our prior written consent, which may be granted or withheld in our discretion. | | m. | Conditions for franchisor's approval of transfer | 14.C. | For approval of your transfer, you must provide us with 30 days prior written notice of the proposed transfer; you and your Owners must not have defaulted in your obligations under the Franchise Agreement and all other agreements with us; you and your Owners must be in compliance with your obligations under the Franchise Agreement and all other agreements with us; the transferee must agree to be bound by all of the terms and provisions of the Franchise Agreement; the transferee's owners must personally guarantee all of the terms and provisions of the Franchise Agreement; you and your Owners must sign a general release in favor of us; the transfer must provide for the assignment and/or ownership of the approved location for the Franchised Business, and the transferee's continued use and occupancy of such location throughout the term of the Franchise Agreement; the assets of the Franchised Business must be transferred to the transferee; the transferee and the transferee's owners and managers, at the transferee's expense, must complete our training programs; we waive our right of first refusal; we approve of the transfer and transferee in writing and subject to our discretion; and you pay the Transfer Fee (subject to applicable state laws). |
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| n. | Franchisor's right of first refusal to acquire franchisee's business | 14.F. | We have the right to match any offer to purchase your Dryer Vent Squad Business or the corporate entity operating your Dryer Vent Squad Business. |
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Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 41–45)
What This Means (2024 FDD)
According to Dryer Vent Squad's 2024 Franchise Disclosure Document, Dryer Vent Squad retains the right of first refusal should a franchisee decide to sell their business. This means that if a franchisee receives an offer to purchase their Dryer Vent Squad business or the corporate entity operating the Dryer Vent Squad business, Dryer Vent Squad has the right to match that offer.
This right of first refusal allows Dryer Vent Squad to maintain control over who enters their franchise system. If a franchisee wants to sell their business to a third party, Dryer Vent Squad can step in and purchase the business themselves, preventing an unwanted individual or group from becoming a franchisee.
For a prospective franchisee, this clause means that selling the business may not be as straightforward as simply accepting the highest offer. Dryer Vent Squad has the ability to override any offer and purchase the business themselves, potentially at the same price offered by the third party. Franchisees should consider this when planning their exit strategy and potential valuation of their Dryer Vent Squad business.