When a Jersey Mikes franchise agreement is assigned, what does the assignee agree to?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
n by the corporation or limited liability company of Franchisee's obligations under this Agreement.
- b. If Franchisee is a Business Entity (defined in Section 31), Franchisor will consent to Ownership Interest Transfers among Fr anchisee's original Principals and waive payment of a Transfer Fee and its right of first refusal under Section 19.7 if the Transfer does not result in a Transfer of a Controlling Interest. The transferor shall deliver to Franchisor such doc umentation and information concerning the Ownership Interest Transfer and the resulting ownership of Franchisee as Franchisor may request. The required documentation will include, without limitation, a Guaranty and Assumption of Obligations signed by each Principal who has not previously signed such documents.
- 19.7 Right of First Refusal. If Franchisee or one or more of its Principals wishes to effectuate a Transfer, consistent with any bona fide binding offer received from a third party to purchase that interest, then the proposed seller will promptly notify Franchisor in writing of the offer, at least ninety (90) days prior to the proposed Transfer, and will provide any additional information and documentation relating to the offer that Franchisor requires. Franchisor will have the option, exercisable within fifteen (15) Business Days after Franchisor's receipt of a fully executed purchase agreement, to send written notice to the seller that Franchisor intends to purchase the seller's interest on the same terms and conditions provided under the fully executed purchase agreement received by Franchisor. If Franchisor elects to purchase the seller's interest, Franchisor must receive, and Franchisee and its owners agree to make, all customary representations and warranties given by the seller of the assets of a business or the ownership interests in a legal entity, as applicable. Franchisor has the unrestricted right to assign the right of first refusal outlined in this Section 19.7.
If Franchisee receives a bona f ide binding offer from a third party to purchase the Franchised Restaurant along with other JERSEY MIKE'S restaurants that Franchisee, or its affiliates, own, Franchisor may decide, in its sole discretion, whether to purchase only the Franchised Restaurant or a combination of the Franchised Restaurants of the other JERSEY MIKE'S restaurants owned by Franchisee, or its affiliates, on the same business terms as they relate to the Franchised Restaurant.
If an offer from a third party provides for payment of consideration other than cash, Franchisor may elect to purchase the interest proposed to be sold for the cash equivalent. If the parties cannot agree within a reasonable time on the cash equivalent of the non-cash part of the offer, then the cash equivalent will be determined by one independent accredited appraiser who will conduct an appraisal and, in doing so, be bound by the criteria specific herein.
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
Based on the 2025 Jersey Mikes Franchise Disclosure Document, if a franchisee is a business entity and ownership interest is transferred among the original principals, the transferor must provide documentation and information about the transfer. This documentation must include a Guaranty and Assumption of Obligations signed by each principal who has not previously signed such documents. This implies that the assignee agrees to guarantee the obligations under the franchise agreement.
Additionally, if Jersey Mikes exercises its right of first refusal to purchase a franchisee's interest, the franchisee and its owners agree to provide all customary representations and warranties given by the seller of the assets of a business or the ownership interests in a legal entity. This suggests that an assignee, stepping into the shoes of the original franchisee, would need to agree to these customary representations and warranties.
In the context of a lease assignment, the franchisee has the right to sublet, assign, or transfer its interest in the lease to Jersey Mikes or its affiliate, another Jersey Mikes franchisee, or a corporation with which the franchisee or franchisor may merge or consolidate, without the landlord's approval or a guarantee of the franchisor's obligations. This indicates that the assignee would assume the obligations under the lease agreement as well.