What is the Engel & Volkers franchisee required to do when soliciting the assignment of any equity interest to a third party?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
ies of related transactions, by operation of law or otherwise (each, an "assignment"), without first obtaining Franchisor's written consent and, where applicable, complying with Franchisor's right of first refusal, each as provided in this Section 22. Any assignment in violation of this Section 22 will be null, void and of no effect. In addition, Franchisee must not sub-franchise, sub-license, subcontract, share or divide or partition rights under this Agreement without Franchisor's prior written consent. Franchisor may in its absolute discretion withhold such consent.
22.3 Assignment By Franchisee – Sale To Third Party
If Franchisee or any of its owners wish to solicit, offer, or discuss the assignment of any equity or economic interest in Franchisee or assets of its business to a third party (whether by stock sale, asset sale, merger, operation of law or otherwise), Franchisee shall use its best efforts and shall employ reasonable security measures, including having any third parties who are to be presented with Confidential Information sign appropriate nondisclosure agreements which are acceptable to Franchisor, to prevent any unauthorized disclosure of or access to the Proprietary Information and shall immediately advise Franchisor of any information it has or receives of any unauthorized disclosure or access. Franchisee shall provide copies of all such non-disclosure agreements to Franchisor upon request.
If Franchisor does not elect to exercise its right of first refusal (as provided in Section 22.5 below), then Franchisor will not unreasonably withhold consent to Franchisee's sale, transfer or assignment of any interest in Franchisee (if Franchisee is a business entity), the
franchise conveyed by this Agreement and Franchisee's right to use the ENGEL & VÖLKERS System, or any interest in any of these, to a third party. Franchisee agrees that it will not be unreasonable for Franchisor to impose, among other requirements, the following conditions to granting consent to Franchisee's proposed sale, assignment or transfer of any of the foregoing:
- 22.3.1 That the proposed assignee (meaning individual or business entity which, after the proposed assignment, will be the franchisee under this Agreement or under any successor/renewal agreement) applies to Franchisor for acceptance as a franchisee and demonstrates to Franchisor's satisfaction that the proposed assignee (and, if it is a business entity, each and every Principal owner and guarantor of the proposed assignee) possesses the skills, qualifications, financial condition, background and history, reputation, economic resources, education, managerial and business experience, moral character, credit rating and ability to assume the duties and obligations under this Agreement or any successor agreement. Franchisee must pay the costs of any investigation required to be conducted by Franchisor.
- 22.3.2 That, upon Franchisor's request, the proposed assignee (or, if the proposed assignee is a business entity, each and every Principal owner or guarantor of the proposed assignee) presents himself, herself or itself for a personal interview at Franchisor's corporate office, or any other location (or by virtual / videoconference call) that Franchisor designates, at a date and time Franchisor reasonably requests, without expense to Franchisor. Franchisor may determine to meet with the proposed assignee at his, her or its principal place of business or residence and, if Franchisor does so, Franchisee will reimburse Franchisor for all travel, lodging, meal and personal expenses related to such meeting.
- 22.3.3 That the proposed assignee has the organizational, managerial and financial structure, resources, and capital required to conduct and operate the franchised Business: (i) in accordance with the System Documentation and brand standards as ENGEL & VÖLKERS and Franchisor indicate from time to time;
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, a franchisee who wishes to solicit the assignment of any equity or economic interest in the franchise to a third party must take specific actions to protect confidential information and inform Engel & Volkers of the potential transaction. The franchisee must use their best efforts and employ reasonable security measures, including having any third parties who are to be presented with Confidential Information sign appropriate nondisclosure agreements acceptable to Engel & Volkers. The franchisee must also immediately advise Engel & Volkers of any unauthorized disclosure or access to proprietary information and provide copies of all non-disclosure agreements upon request.
If Engel & Volkers chooses not to exercise its right of first refusal, it will not unreasonably withhold consent to the sale, transfer, or assignment of any interest in the Engel & Volkers franchise to a third party. However, Engel & Volkers can impose certain conditions to granting consent. These conditions include ensuring that the proposed assignee applies for acceptance as a franchisee and demonstrates that they possess the necessary skills, qualifications, financial condition, background, history, reputation, economic resources, education, managerial and business experience, moral character, credit rating, and ability to fulfill the obligations under the franchise agreement.
The Engel & Volkers franchisee is responsible for covering the costs of any investigation that Engel & Volkers deems necessary to conduct. Additionally, the franchisee must furnish Engel & Volkers with a copy of any proposed contract of assignment and any related agreements, and promptly provide a copy of the executed contract of assignment and related agreements following execution. The franchisee must also ensure that both the franchisee and the assignee execute Engel & Volkers' then-standard form of General Release. The franchisee must pay Engel & Volkers a transfer fee of $2,500 to compensate for legal, accounting, and other expenses, although this fee does not apply to mortgages or other usual financing encumbrances. The proposed assignee must not own, operate, or have any interest in a competitive business to Engel & Volkers.