Does Mr. Sandless have a right of first refusal to purchase a franchise?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
- (g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause.
This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise.
Good cause shall include, but is not limited to:
(i) Failure of the proposed transferee to meet the franchisor's then-current reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. 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 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 30–34)
What This Means (2025 FDD)
According to Mr. Sandless's 2025 Franchise Disclosure Document, the franchise agreement does not prevent Mr. Sandless from exercising a right of first refusal to purchase the franchise. This means that if a franchisee decides to sell their Mr. Sandless franchise, they must first offer the franchise to Mr. Sandless on the same terms and conditions as any offer from a third party.
This right of first refusal allows Mr. Sandless to maintain control over who enters the franchise system and to prevent the franchise from falling into the hands of a competitor or someone who does not meet their standards. It also ensures that Mr. Sandless has the option to reacquire a successful franchise location if the franchisee decides to sell.
However, the FDD also states that a franchisor cannot refuse a transfer of ownership except for good cause. Good cause includes the proposed transferee's failure to meet Mr. Sandless's qualifications, the transferee being a competitor, the transferee's unwillingness to comply with obligations, or failure to pay sums owed. Additionally, Mr. Sandless can have the right to acquire the assets of a franchise for market or appraised value if the franchisee has breached the franchise agreement and failed to cure the breach.