What right does Itan have if a franchisee or Owner wishes to engage in a Transfer?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
- **19.5.
Our Right of First Refusal.** If you or an Owner wish to engage in a Transfer, you or the Owner, as applicable, must obtain and send us a bona-fide offer executed by the purchaser after completion of due diligence.
(j) you and your Owners sign a General Release;
(k) you agree to subordinate the transferee's financial obligations to you to the transferee's financial obligations owed to us pursuant to the franchise agreement (we may require you to enter into a written subordination agreement);
(l) we choose not to exercise our right of first refusal described in §19.5; and
(m) you or the transferring Owner, as applicable, and the transferee satisfy all other conditions we reasonably require as a condition to approval of the Transfer.
Our consent to a Transfer shall not constitute a waiver of any Claims we have against the transferor or our right to demand the transferee comply with all terms of the franchise agreement.
- 8.2. By You. The rights and duties created by this Agreement are personal to you and the Owners. We are granting you area development rights in reliance upon the character, skill, attitude, business ability and financial resources of you and your Owners. Because this Agreement is a personal services contract, neither you nor any Owner may engage in a Transfer (other than a Permitted Transfer) without our prior approval. Any Transfer (other than a Permitted Transfer) without our approval is void and constitutes a breach of this Agreement. We will not unreasonably withhold our approval of a proposed Transfer if all of the following conditions are satisfied:
- (a) we believe the proposed transferee has sufficient business experience, aptitude and financial resources to develop, own and operate all Required Salons remaining to be developed under this Agreement and meets our minimum criteria for area developers;
- (b) you and your Owners and affiliates are in full compliance with all Definitive Agreements;
- (c) the transferee's owners successfully complete, or make arrangements to attend, the initial training program and the transferee pays us any applicable training fee;
- (d) the transferee and its owners sign our then-current form of area development agreement (unless we, in our sole discretion, instruct you to assign this Agreement to the transferee), except that: (i) the Term shall be the Term remaining under this Agreement; (ii) the transferee need not pay a separate Development Fee; and (iii) the Development Schedule and Development Territory shall be the same Development Schedule and Development Territory specified in this Agreement (modified to reflect the development obligations satisfied prior to the Transfer);
- (e) you or the transferee pay us a $10,000 transfer fee (in addition to the transfer fee, you must reimburse us for any commission we pay our broker if our broker finds the transferee);
- (f) you assign all Franchise Agreements to the transferee in accordance with the transfer provisions under each such Franchise Agreement, including payment of any transfer fee imposed under each such Franchise Agreement (unless we waive this requirement);
- (g) you and your Owners sign a General Release;
- (h) we choose not to exercise our right of first refusal described in §8.5; and
- (i) you or the transferring Owner, as applicable, and the transferee satisfy all other conditions we reasonably require as a condition to our approval of the Transfer.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, if a franchisee or owner wishes to engage in a transfer, they must first obtain a bona-fide offer executed by the purchaser after completion of due diligence and send it to Itan. Itan then has the right of first refusal, meaning they can choose to purchase the franchise themselves under the same terms offered by the third party.
If Itan chooses not to exercise its right of first refusal, the transfer can proceed if certain conditions are met. These conditions include the franchisee and their owners signing a General Release, the franchisee agreeing to subordinate the transferee's financial obligations to their own obligations to Itan, and the franchisee or transferring owner and the transferee satisfying any other reasonable conditions Itan requires. Itan's consent to a transfer does not waive any claims they have against the transferor or their right to demand compliance from the transferee with the franchise agreement terms.
It is important to note that any transfer without Itan's approval (unless it is a Permitted Transfer) is considered void and a breach of the agreement. Itan states that they will not unreasonably withhold approval of a proposed transfer if the proposed transferee has sufficient business experience, aptitude, and financial resources, the franchisee is in full compliance with all agreements, the transferee completes the initial training program and pays any applicable fee, the transferee signs Itan's current area development agreement, the franchisee or transferee pays a $10,000 transfer fee (plus broker commissions if applicable), and the franchisee assigns all Franchise Agreements to the transferee, including payment of any transfer fee under each Franchise Agreement (unless waived by Itan).