Does the Ifly buyer remain liable after assignment if the assignee defaults?
Ifly Franchise · 2024 FDDAnswer from 2024 FDD Document
- 6.3.1 This Agreement shall not be assignable by Buyer without the express written consent of Seller, which consent shall not be unreasonably withheld or delayed, so long as the prospective assignee executes a then current iFLY franchise agreement containing substantially the same terms as the Franchise Agreement. Seller may withhold its consent, and in so doing will not be deemed to be acting unreasonably, if Seller in the exercise of its reasonable business judgment determines that the prospective assignee has insufficient business reputation or experience, or that the financial condition of the prospective assignee is inadequate to fulfill the obligations of the franchise agreement (notwithstanding that Buyer may remain liable). It is understood and agreed that the express written consent of Seller shall be required before assignment to an Affiliate of Buyer or a successor of Buyer of all or substantially all of the relevant (to this Agreement) assets of Buyer. In the event that this Section 6.3.1 is determined to be unenforceable, Buyer agrees to take such actions as Seller may require to protect Seller's interests, including, without limitation, offering Seller a right of first refusal to purchase the Equipment and/or prior to any sale to a third party, removing all trademarks and other indicia identifying the Equipment with Seller or its Affiliates.
Source: Item 23 — Receipts (FDD pages 57–174)
What This Means (2024 FDD)
According to the 2024 Ifly Franchise Disclosure Document, if an Ifly buyer (franchisee) assigns their agreement to another party, the original buyer may remain liable for the obligations under the franchise agreement, even after the assignment. This depends on whether Ifly, the seller, determines that the prospective assignee has insufficient business reputation or experience, or inadequate financial condition to fulfill the obligations, despite the original buyer potentially remaining liable.
Specifically, Ifly's consent to the assignment must be obtained in writing, and Ifly states that it will not unreasonably withhold or delay consent, provided the new assignee agrees to Ifly's then-current franchise agreement terms. However, Ifly can withhold consent if it deems the assignee unfit based on business reputation, experience, or financial condition. This clause protects Ifly by ensuring that any new franchisee meets their standards, regardless of whether the original franchisee remains secondarily liable.
This condition is significant for prospective Ifly franchisees because it means that even after selling the franchise, they might still be responsible if the new owner fails to meet the financial or operational obligations of the franchise agreement. Therefore, franchisees should carefully consider the financial stability and business acumen of any potential assignee and negotiate the terms of the assignment agreement accordingly to mitigate potential risks.