For The Standardx franchise, what is the consequence of transferring the Agreement without complying with the terms and conditions in Article XII?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
Accordingly, unless otherwise specified in this ARTICLE XII, neither this Agreement (or any interest in this Agreement), the Hotel or substantially all of its assets, nor any ownership interest in Franchisee or any Owner (if such Owner is a legal entity) may be transferred (as defined in Exhibit A) without complying with the terms and conditions applicable to such transfer in this ARTICLE XII.
A transfer of the Hotel's ownership, possession, or control, or substantially all of its assets, may be made only with a transfer of this Agreement.
Any transfer without complying with the terms and conditions applicable to such transfer in this ARTICLE XII, including Hyatt's approval (where such approval is required under this Agreement), is a breach of this Agreement.
Source: Item 18 — OTHER INCOME (LOSS), NET (FDD pages 187–399)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, transferring the franchise agreement without adhering to the terms and conditions outlined in Article XII constitutes a breach of the agreement. This means that any transfer of the Hotel's ownership, possession, or control, or substantially all of its assets, must be made in conjunction with a transfer of the franchise agreement, and in compliance with Article XII.
Article XII of The Standardx franchise agreement covers the ownership of the franchisee and the conditions under which a transfer can occur. It distinguishes between Non-Control Transfers, which may be permissible without The Standardx's consent under certain conditions, and Control Transfers, which require advance notification to The Standardx. These conditions include ensuring that the transferee is not a Competing Brand Owner or a Sanctioned Person and adhering to specific procedures for notifying The Standardx of the transfer.
For a prospective franchisee, this means that any desire to sell the franchise or transfer ownership interests must be carefully managed to comply with Article XII. Failure to do so could result in a breach of the franchise agreement, potentially leading to termination of the franchise and other legal consequences. It is crucial to understand the specific requirements for both Non-Control and Control Transfers and to maintain open communication with The Standardx throughout any transfer process. Even if The Standardx does not exercise its right of first offer, the proposed transfer must still comply with Article XII to be permissible.