Under what conditions is a Jersey Mikes franchisee prohibited from selling or leasing the Collateral?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
- 19.2 Conditions to Voluntary Transfer of Rights. Neither Franchisee nor any Principal (defined in Section 31) shall effectuate an Asset Transfer (defined in Section 31) before the Franchised Restaurant opens for business under any circumstances. After the Franchised Restaurant opens for business, any Asset Transfer will be subject to Franchisor's prior written consent, in its sole and absolute discretion. Franchisor may condition its consent on compliance with certain requirements, including, without limitation, any of the following (which Franchisee agrees are reasonable):
- a. At the time of A sset Transfer, Franchisee is in full compliance with Franchisee's obligations under this Agreement and all other agreements between Franchisee and Franchisor and its Affilia tes, including payment of all monetary obligations due Franchisor and its Affiliates;
- b. The transferee executes Franchisor's then-current form of franchise agreement, Guaranty and Assumption of Obligations, and other collateral agreements Franchisor
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
According to Jersey Mikes's 2025 Franchise Disclosure Document, a franchisee faces restrictions on transferring assets, which includes selling or leasing collateral, under specific conditions. Before the Jersey Mikes restaurant even opens, an asset transfer is strictly prohibited. After opening, any asset transfer requires Jersey Mikes's prior written consent, which they can withhold at their discretion.
Jersey Mikes may condition its consent to a transfer on several requirements. These include the franchisee being in full compliance with all agreements, including payment of all monetary obligations to Jersey Mikes and its affiliates. The potential buyer must also execute Jersey Mikes's current franchise agreement, a Guaranty and Assumption of Obligations, and any other agreements Jersey Mikes requires. Furthermore, each principal of the proposed buyer must meet Jersey Mikes's criteria for new franchisees.
These transfer restrictions are typical in franchising, as the franchisor seeks to maintain brand standards and ensure the financial stability and operational competence of its franchisees. For a prospective Jersey Mikes franchisee, this means that exiting the business through a sale or lease isn't guaranteed and is subject to the franchisor's approval. It also highlights the importance of staying in good standing with Jersey Mikes to facilitate any future transfer.