Does Extreme Art Studio have a right of first refusal to purchase a franchise?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
- (g) A provision which permits us to refuse to permit a transfer of ownership of a Franchise, except for good cause.
This subdivision does not prevent us from exercising a right of first refusal to purchase the Franchise.
Good cause shall include, but is not limited to:
(i) the failure of the proposed transferee to meet our then-current reasonable qualifications or standards.
(ii) the fact that the proposed transferee is a competitor of us or our subfranchisor.
(iii) the unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) your or proposed transferee's failure to pay any sums owing to us or to cure any default in the Franchise Agreement existing at the time of the proposed transfer.
(h) A provision that requires you to resell to us items that are not uniquely identified with us.
This subdivision does not prohibit a provision that grants to us a right of first refusal to purchase the assets of a Franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants us the right to acquire the assets of a Franchise for the market or appraised value of such assets if you have breached the lawful provisions of the Franchise Agreement and have failed to cure the breach in the manner provided in subdivision (c).
Source: Item 23 — RECEIPTS (FDD pages 49–214)
What This Means (2024 FDD)
According to the 2024 Franchise Disclosure Document, Extreme Art Studio does have a right of first refusal to purchase a franchise. Specifically, this right applies when a franchisee seeks to transfer ownership of their franchise to a third party. This means that before a franchisee can sell their Extreme Art Studio franchise to someone else, they must first offer Extreme Art Studio the opportunity to buy the franchise on the same terms and conditions offered by the third party.
This right of first refusal does not prevent Extreme Art Studio from exercising this right to purchase the franchise. Additionally, Extreme Art Studio also has the right to acquire the assets of a franchise for their market or appraised value if the franchisee has breached the Franchise Agreement and failed to correct the breach.
For a prospective franchisee, this means that if they decide to sell their Extreme Art Studio franchise in the future, Extreme Art Studio will have the first option to purchase it. This could potentially streamline the selling process if Extreme Art Studio is interested. However, it also means that the franchisee may not be able to accept an offer from a third party if Extreme Art Studio matches the offer. It is important for potential franchisees to understand the implications of this right of first refusal and how it might affect their ability to sell their franchise in the future.