Does Jack In The Box have any restrictions on its ability to assign the Franchise Agreement?
Jack_In_The_Box Franchise · 2025 FDDAnswer from 2025 FDD Document
11. NON-ASSIGNABILITY.
- A. This Agreement is personal to Developer. Except as provided herein, neither Developer nor any Owner shall sell, assign or otherwise transfer this Agreement or any direct or indirect right or interest in the development rights granted, nor permit any such assignment or transfer to occur directly or indirectly, whether by agreement or operation of law; nor pledge, mortgage, hypothecate, give as security for an obligation, or in any manner encumber any right under this Agreement or any direct or indirect interest in Developer, without the prior written consent of Company. In no event shall any assignment relieve Developer or any Owner of any obligations to Company under this Agreement unless Company shall expressly consent to such release from liability. Any purported sale, assignment, pledge, mortgage, hypothecation or encumbrance contrary to the provisions of this Agreement shall constitute a default under this Agreement and shall for purposes of any agreements with the Company, and to the extent permitted by law, be void and of no force or effect.
- B. Subject to the prior written consent of Company, Developer may assign this Agreement to a corporation, partnership or limited liability company, that is not then or thereafter to be engaged in any business other than the development and operation of Jack in the Box restaurants and in which Owners of Developer shall own one hundred percent (100%) of the outstanding securities. Any such assignment shall not relieve any Owner of personal liability for performance of all obligations under this Agreement. No subsequent transfer or issuance of shares in such corporate assignee shall be made without Company's prior written approval. Developer or the Operator, if Franchisee is not an individual, shall, throughout the term of this Agreement, own the percentage of the voting, capital and profits interest in outstanding securities of the corporation, partnership or limited liability interests as required by Company in writing. The Articles of Incorporation and/or By-Laws, partnership agreement or limited liability agreement, or any similar formation documents, copies of which shall be provided to Company, shall at all times reflect the restrictions contained herein, unless otherwise directed by Company; and all stock certificates, membership certificates, or other evidence of ownership shall bear on their face the following legend restricting transfer:
Source: Item 23 — RECEIPT (FDD pages 94–634)
What This Means (2025 FDD)
According to Jack In The Box's 2025 Franchise Disclosure Document, the Franchise Agreement is personal to the developer, and there are restrictions on its assignability. A developer cannot sell, assign, or transfer the agreement or any rights or interests related to it without the prior written consent of Jack In The Box. This restriction extends to any direct or indirect attempts to transfer the agreement, whether through an agreement or by operation of law. Additionally, the developer cannot pledge, mortgage, hypothecate, or encumber any rights under the agreement without the company's consent. Any attempt to do so constitutes a default under the agreement and is considered void.
However, the document states that a developer may assign the agreement to a corporation, partnership, or limited liability company, provided that the entity is solely engaged in the development and operation of Jack In The Box restaurants. The owners of the developer must also maintain 100% ownership of the outstanding securities in the new entity. Even with this type of assignment, the original owners remain personally liable for the performance of all obligations under the agreement unless Jack In The Box expressly releases them from this liability. Furthermore, any subsequent transfer or issuance of shares in the assignee entity requires prior written approval from Jack In The Box.
To ensure compliance, the Articles of Incorporation, By-Laws, partnership agreement, or limited liability agreement of the assignee entity must reflect these restrictions, unless otherwise directed by Jack In The Box. All stock certificates, membership certificates, or other evidence of ownership must bear a legend restricting transfer, indicating that ownership can only be transferred under and subject to Jack In The Box franchise agreements. These measures ensure that Jack In The Box maintains control over who operates its franchises and that the brand's standards and obligations are upheld even in cases of assignment.