Under what circumstances do subsections (f), (g), (h), and (i) regarding transfer obligations not apply to an Itan franchisee?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
- (f) A provision requiring that arbitration or litigation be conducted outside this state.
This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
- (g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause.
This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise.
Good cause shall include, but is not limited to:
(v) The failure of the proposed transferee to meet the franchisor's then current reasonable qualifications or standards.
(vi) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
(vii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(viii) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor.
This subdivision does not prohibit a provision that grants to a franchisor 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 the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if
the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).
(i) A provision which permits the franchisor to directly or indirectly convey, assign, or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
Based on the 2025 Itan Franchise Disclosure Document, subsections (f), (g), (h), and (i) outline specific restrictions and obligations related to franchise agreements, particularly concerning arbitration/litigation location, transfer of ownership, resale of items to the franchisor, and the franchisor's ability to transfer contractual obligations. These subsections are designed to protect the franchisee from potentially unfair or restrictive practices by the franchisor.
Specifically, subsection (f) addresses the location of arbitration or litigation, ensuring it is not mandatorily set outside the franchisee's state. Subsection (g) pertains to the franchisor's ability to refuse a transfer of ownership, limiting such refusal to instances of 'good cause.' Subsection (h) restricts the franchisor from requiring the franchisee to resell items not uniquely identified with the franchisor. Lastly, subsection (i) prevents the franchisor from transferring its contractual obligations without ensuring the required services are still provided.
However, the document indicates that these protections are not absolute. For instance, a franchisee can agree to arbitration outside their state after entering the agreement, and the franchisor retains the right of first refusal for purchasing the franchise. 'Good cause' for denying a transfer includes the transferee's failure to meet qualifications, being a competitor, unwillingness to comply with obligations, or failure to pay outstanding sums. The franchisor can also acquire franchise assets at market value if the franchisee breaches the agreement and fails to cure it. These nuances are important for prospective Itan franchisees to understand, as they define the boundaries of franchisor control and franchisee rights during the franchise term and any potential transfer scenarios.