What must Owners do before selling or transferring any interest in the Extreme Art Studio Franchisee?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
Owners acknowledge and agree that we have granted the Franchise Agreement to Franchisee in reliance on Owners' business experience, skill, financial resources and personal character.
Accordingly, Owners agree: (a) not to sell, encumber, assign, transfer, convey, pledge, merge or give away any direct or indirect interest in this Franchisee, unless Owners first comply with the sections in the Franchise Agreement regarding transfers and assignment, and (b) that any attempt to do so will be a breach of this Owners Agreement and the Franchise Agreement.
(d) the transferee's representatives satisfactorily complete our then-current Initial Training Program;
(e) the owner of the facility in which each Studio is located allows you to transfer the corresponding lease agreement to the transferee;
(f) the transferee shall (if the transfer is of this Franchise Agreement), or you shall (if the transfer is of a controlling ownership interest in you or one of your owners), sign our then-current form of franchise agreement and related documents, (including, but not limited to, our then-current form of Owners Agreement) any and all of the provisions of which may differ materially from any and all of those contained in this Franchise Agreement, including the Royalty and the Marketing Fees; provided, however, that the term of the new franchise agreement signed will equal the remainder of the then-remaining term of this Franchise Agreement;
(g) you pay us a transfer fee for each Extreme Art Studio Business to be transferred equal to $10,000 per Extreme Art Studio Business, and the cost of any applicable broker fees and any training required.
You will pay us a nonrefundable deposit of $1,000 per Extreme Art Studio Business when you request approval of a transfer and pay, in certain funds, the remaining amount when you execute the transfer documents;
(h) you (and your transferring owners) sign a general release, in a form satisfactory to us, of any and all known or unknown claims against us, our affiliates and subsidiaries, and their respective shareholders, members, officers, directors, employees, and agents arising before or contemporaneously with the transfer;
(i) all individuals and entities who will be direct or indirect owners must execute or have executed a guarantee in the form we prescribe;
(j) we have determined that the purchase price and payment terms will not adversely affect the transferee's operation of the Franchised Business;
(k) if you or your owners finance any part of the purchase price, you and/or your owners agree that all of the transferee's obligations under promissory notes, agreements, or security interests reserved in the Franchised Business are subordinate to the transferee's obligation to pay the Royalty, Marketing Fees, and other amounts due to us, our affiliates, and third-party vendors, and otherwise to comply with this Franchise Agreement;
(l) you and your transferring owners will not directly or indirectly, at any time or in any manner (except with respect to other Extreme Art Studio Businesses you own and
operate), identify yourself or themselves or any business as a current or former Extreme Art Studio Business or as one of our franchise owners; use any Mark, any colorable imitation of a Mark, or other indicia of an Extreme Art Studio Business in any manner or for any purpose; or utilize for any purpose any trade name, trade or service mark, or other commercial symbol that suggests or indicates a connection or association with us;
- (m) you and your transferring owners comply with the non-compete obligations under Section 15.4 of this Franchise Agreement; and
- (n) you and your transferring owners reimburse us our costs upon receipt for our invoice for any attorney fees, broker commissions, finder fees, or other placement fees we incur as a result of the transfer.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, owners must comply with specific requirements before selling or transferring any direct or indirect interest in the franchise. These requirements are detailed in the sections of the Franchise Agreement pertaining to transfers and assignments. Failure to comply with these sections would constitute a breach of the Owners Agreement and the Franchise Agreement.
Specifically, the transferee's representatives must satisfactorily complete Extreme Art Studio's then-current Initial Training Program. Additionally, the owner of the facility in which each studio is located must allow the transfer of the corresponding lease agreement to the transferee. The transferee (if the transfer is of the Franchise Agreement) or the owner (if the transfer is of a controlling ownership interest) must sign Extreme Art Studio's then-current form of franchise agreement and related documents, which may differ materially from the existing agreement. A transfer fee of $10,000 per Extreme Art Studio Business must be paid, along with the cost of any applicable broker fees and required training. A nonrefundable deposit of $1,000 per Extreme Art Studio Business is required when requesting approval of a transfer, with the remaining amount due upon execution of the transfer documents.
Furthermore, the transferring owners must sign a general release of any and all known or unknown claims against Extreme Art Studio and its affiliates. All individuals and entities who will be direct or indirect owners must execute a guarantee in the form prescribed by Extreme Art Studio. Extreme Art Studio must determine that the purchase price and payment terms will not adversely affect the transferee's operation of the Franchised Business. If the purchase is financed, the transferee's obligations must be subordinate to the obligation to pay royalties, marketing fees, and other amounts due to Extreme Art Studio. The transferring owners must also comply with non-compete obligations and not identify themselves as a current or former Extreme Art Studio franchise owner or use any marks associated with Extreme Art Studio. Finally, the transferring owners must reimburse Extreme Art Studio for any attorney fees, broker commissions, or other placement fees incurred as a result of the transfer.
These stipulations ensure that Extreme Art Studio maintains control over who becomes a franchisee and that the transfer process does not negatively impact the brand or other franchisees. Prospective franchisees should carefully review these requirements and understand the financial and legal implications of transferring ownership.