Does the Jersey Mikes franchisee have the right to interfere with a proposed transfer by the franchisor or its principals?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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.
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the Jersey Mikes franchisee does not have the explicit right to interfere with a proposed transfer by the franchisor. However, the franchisee does have certain rights related to transfers of their own franchise interest.
The Jersey Mikes franchise agreement includes a "right of first refusal" clause. This means that if a franchisee receives a legitimate offer from a third party to buy their restaurant, the franchisee must first notify Jersey Mikes of the offer in writing at least 90 days before the proposed transfer. Jersey Mikes then has the option to purchase the franchisee's interest on the same terms and conditions as the third-party offer. Jersey Mikes has 15 business days after receiving a fully executed purchase agreement to exercise this option.
This right of first refusal gives Jersey Mikes control over who enters the franchise system, ensuring that new franchisees meet their standards. While the franchisee cannot directly interfere with a transfer by Jersey Mikes itself, they do have the ability to potentially influence the outcome of a sale of their own franchise by triggering Jersey Mikes's right to first refusal. This is a common practice in franchising, allowing the franchisor to maintain brand consistency and quality control.