Under what conditions does Itan have the right to acquire the assets of a franchise?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
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).
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, Itan has the right to acquire a franchise's assets under specific circumstances related to breaches of the franchise agreement. Specifically, Itan can acquire the assets if the franchisee has violated the lawful provisions of the franchise agreement and has not corrected the breach as outlined in the agreement. This acquisition would be for the market or appraised value of the assets.
This provision protects Itan by allowing them to take control of a non-compliant franchise, ensuring that brand standards and operational procedures are maintained. For a prospective franchisee, this means that strict adherence to the franchise agreement is crucial. Failure to comply with the agreement's terms can result in Itan taking over the business.
It is important to note that this right is not absolute. The franchisee must have both breached the agreement and failed to cure the breach according to the procedures specified in the franchise agreement. This provides some level of protection for the franchisee, as they have an opportunity to correct any issues before Itan can exercise its right to acquire the assets. Additionally, the assets will be acquired at market or appraised value, ensuring the franchisee receives fair compensation. This is a fairly standard clause in franchise agreements, designed to protect the franchisor's brand and system while providing a mechanism for dealing with non-compliant franchisees.