Does the Red Wagon Club Sublicense Agreement define what constitutes a transfer by the franchisee?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
gram to Franchisor's satisfaction;
- (7) if the proposed transfer (including any assignment of the lease or subleasing of the Office) requires notice to or approval from Franchisee's landlord, or any other action under the terms of the lease, Franchisee have taken such appropriate action and delivered Franchisor evidence of the same;
- (8) the transferee shall (if the transfer is of this Agreement), or Franchisee shall (if the transfer is of a Controlling Interest in Franchisee or one of its owners), sign Franchisor's thencurrent form of franchise agreement and related documents, any and all of the provisions of which may differ materially from any and all of those contained in this Agreement, including the amount of the Program Fee, the Brand Fund contribution, and/or changes to the imposition of territorial protections; provided, however, that the term of the new franchise agreement signed will equal the remainder of the then-remaining Term;
- (9) Franchisee pays Franchisor, or arranges for the payment to Franchisor by the transferee, a transfer fee equal to 75% of Franchisor's then-current Initial Franchise Fee, unless (a) the transfer is o
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 38–44)
What This Means (2024 FDD)
The 2024 Red Wagon Club Franchise Disclosure Document does not explicitly define what constitutes a transfer within the Sublicense Agreement. However, it does outline conditions and fees associated with the transfer of the franchise agreement itself or a controlling interest in the franchisee's business.
Specifically, if a franchisee transfers their agreement, the transferee must sign Red Wagon Club's current franchise agreement, which may have different terms than the original agreement. These terms can include changes to the Program Fee, Brand Fund contribution, and territorial protections. The term of the new franchise agreement will equal the remainder of the original term.
Additionally, Red Wagon Club requires a transfer fee. This fee is 75% of the then-current Initial Franchise Fee. There are exceptions: the fee is $1,500 for a transfer of a non-Controlling Interest between existing employees or an existing employee and a new shareholder. If the transfer is to an existing Red Wagon Club franchisee, the transfer fee is 33% of the then-current Initial Franchise Fee. Since the FDD does not define what constitutes a transfer within the Sublicense Agreement, a prospective franchisee should seek clarification from the franchisor on this matter.