Does the transfer of ownership in the Extreme Art Studio franchisee affect the Owners Agreement?
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.
We may, from time to time, without notice to Owners, assign or transfer any or all of Owners' rights, duties and obligations or any interest therein in this Owners Agreement and, notwithstanding any assignment(s) or transfer(s), the rights, duties and obligations shall be and remain for the purpose of this Owners Agreement.
Each and every immediate and successive assignee or transferee of any of the rights, duties or obligations of any interest therein shall, to the extent of such party's interest in the rights duties and/or obligations, be entitled to the benefits of this Owners Agreement to the same extent as if such assignee or transferee were us.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, the transfer of ownership does affect the Owners Agreement. Specifically, owners must comply with the transfer sections outlined in the Franchise Agreement. Any attempt to transfer ownership without adhering to these sections constitutes a breach of both the Owners Agreement and the Franchise Agreement. Extreme Art Studio grants the Franchise Agreement to the franchisee based on the owners' business experience, skills, financial resources, and personal character.
Extreme Art Studio retains the right to assign or transfer its rights, duties, and obligations within the Owners Agreement without notifying the owners. This ensures that the agreement remains in effect regardless of any assignments or transfers made by Extreme Art Studio. Each successive assignee or transferee is entitled to the benefits of the Owners Agreement to the extent of their interest in the rights, duties, or obligations, as if they were Extreme Art Studio itself.
Furthermore, if there is a transfer of the Franchise Agreement, the transferee (or the original owner, depending on the type of transfer) is required to sign Extreme Art Studio's then-current form of franchise agreement and related documents, including the Owners Agreement. The provisions within this new agreement may differ significantly from the original Franchise Agreement, potentially affecting royalty and marketing fees. This ensures that the Owners Agreement remains current and aligned with Extreme Art Studio's prevailing standards and requirements.
Prospective franchisees should carefully review the transfer provisions within both the Franchise Agreement and the Owners Agreement to fully understand their obligations and the potential implications of transferring ownership. It is also important to note that Extreme Art Studio may review and correct any information provided to the transferee and provide copies of reports regarding the franchised business.