Does Pump It Up's right of first refusal apply to Transfers for Convenience of Ownership?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
(1) We have the right, exercisable within 10 days after receipt of the notice specified in Section 16.B(1), to send written notice to you that we intend to purchase the interest proposed
to be transferred. We may assign our right of first refusal to someone else either before or after we exercise it. Our right of first refusal will not apply to Transfers for Convenience of Ownership under Section 16.C. If the proposed Transfer is to be made pursuant to a sale, we or our designee may purchase the interest proposed to be transferred on the same economic terms and conditions offered by the third party. Closing on our purchase must occur within 60 days after the date of our notice to the seller electing to purchase the interest. If we cannot reasonably be expected to furnish the same consideration as the third party, then we may substitute the reasonable equivalent in cash. If, within 30 days, the parties cannot agree on the reasonable equivalent in cash, we will designate, at our expense, an independent appraiser, and the appraiser's determination of the value of the interest being sold will be final. Any material changes in the terms of the offer from a third party after we have elected not to purchase the seller's interest will constitute a new offer, subject to the same right of first refusal as the third party's initial offer.
Source: Item 23 — RECEIPTS (FDD pages 60–225)
What This Means (2025 FDD)
According to Pump It Up's 2025 Franchise Disclosure Document, Pump It Up's right of first refusal does not apply to Transfers for Convenience of Ownership. Specifically, the FDD states that Pump It Up has the right to purchase the interest proposed to be transferred within 10 days of receiving notice, but this right of first refusal will not apply to Transfers for Convenience of Ownership under Section 16.C. This means that if a franchisee is transferring ownership for convenience, such as to a corporation or limited liability company, Pump It Up waives its right to step in and purchase the franchise interest themselves.
This waiver of the right of first refusal for convenience transfers can be beneficial for Pump It Up franchisees. It allows them to make changes to their business structure without the risk of the franchisor intervening to purchase the business. This provides flexibility for estate planning, tax optimization, or other legitimate business reasons.
However, it is important to note that the transfer for convenience must meet specific conditions. For example, if the franchisee is an individual or partnership and wants to transfer the agreement to a corporation or LLC formed exclusively for ownership convenience, the requirements of Section 16.B still apply. Additionally, the corporation or LLC must be newly organized solely for the transfer purpose, and the franchisee must own all voting securities or membership interests. The franchisee and their owners must also agree to remain personally liable under the agreement as if the transfer did not occur. These conditions ensure that the transfer is genuinely for convenience and does not compromise Pump It Up's interests or the franchisee's obligations.