What representations and warranties about the validity of contracts and liabilities are required when Hydrodog exercises its right of first refusal to buy my Hydrodog business?
Hydrodog Franchise · 2025 FDDAnswer from 2025 FDD Document
We have the right, exercisable by written notice delivered to you or your selling owner(s) within thirty (30) days from the date of the delivery to us of both an exact copy of such offer and all other information we request, to purchase such interest for the price and on the terms and conditions contained in such offer, provided that:
(a) we may substitute cash for any form of payment proposed in such offer (with a discounted amount if an interest rate will be charged on any deferred payments);
(b) our credit will be deemed equal to the credit of any proposed purchaser;
(c) we will have not less than sixty (60) days after giving notice of our election to purchase to prepare for closing; and
(d) we are entitled to receive, and you and your owners agree to make, all customary representations and warranties given by the seller of the assets of a business or the capital stock of an incorporated business, as applicable, including, without limitation, representations and warranties as to:
(i) ownership and condition of and title to stock or other forms of ownership interest and/or assets;
(ii) liens and encumbrances relating to the stock or other ownership interest and/or assets; and
(iii) validity of contracts and the liabilities, contingent or otherwise, of the corporation whose stock is being purchased.
Source: Item 23 — RECEIPTS (FDD pages 43–166)
What This Means (2025 FDD)
According to Hydrodog's 2025 Franchise Disclosure Document, if you decide to sell your Hydrodog business and receive a legitimate offer, Hydrodog has the right of first refusal to purchase it themselves. If Hydrodog exercises this right, you, as the seller, must provide customary representations and warranties. These include assurances about the ownership, condition, and title to the stock or other forms of ownership interest and/or assets.
Specifically, you must warrant that there are no undisclosed liens or encumbrances on the stock or assets being transferred. Furthermore, you must provide assurances regarding the validity of all contracts related to the business and disclose all known liabilities, whether they are definite or contingent.
In essence, Hydrodog requires you to guarantee the accuracy and completeness of the information they receive about the business they are potentially purchasing. This protects Hydrodog from hidden risks or liabilities that could negatively impact the value or operation of the business after the sale. This is a fairly standard practice in business acquisitions, ensuring the buyer has a clear understanding of what they are acquiring.