What happens if the Engel & Volkers franchisor exercises its right of first refusal?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, if a franchisee wishes to sell their equity, economic interest, or assets to a third party, they must first offer Engel & Volkers the right of first refusal. If Engel & Volkers chooses not to exercise this right, they will not unreasonably withhold consent to the sale, transfer, or assignment of the franchise to a third party.
However, Engel & Volkers can impose certain conditions before granting consent to the sale. 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, reputation, economic resources, education, managerial and business experience, moral character, credit rating, and ability to fulfill the obligations under the franchise agreement. The franchisee is responsible for covering the costs of any investigation conducted by Engel & Volkers to assess the proposed assignee.
This right of first refusal allows Engel & Volkers to maintain control over who enters their franchise system, ensuring that new franchisees meet their standards. For a prospective franchisee, this means that selling their franchise may involve a more complex process, as they need to find a buyer who is not only interested in the business but also meets Engel & Volkers's criteria and is approved by them. The franchisee also bears the financial burden of the investigation costs, which could add to the expenses associated with selling the franchise.