Despite an explicit calculation of the transfer fee in the franchise agreement, these transfer fees are often requested by the franchisee to renegotiate, especially in cases where the reasons for the fee are stated and it can be argued that this particular transfer does not cost as much as the fees charged. Franchisors are advised to have uniform fees that prevent too frequent transactions of franchised property, but compensate the franchisor for the costs provided for in the transfer costs. In Chu v. Dunkin` Donuts,2 a potential buyer of a franchise filed a lawsuit against Dunkin` Donuts after refusing to authorize the transfer of a franchise to them. The franchise agreement provided that franchisees could sell their franchise "to an assignee approved by Dunkin." 3 In return, Dunkin` entered into a contract with the former franchisees under which it would not unreasonably refuse such authorisation and would examine the proposed acquirer on the basis of the same criteria used by Dunkin` to qualify any potential purchaser of a franchise. A business lawyer hired for a franchisee will be able to analyze the language of an anti-assignment provision with the utmost care to determine its appropriate effect. In addition, a lawyer experienced in contracts can inform you of the steps you need to take to legally assign your franchise rights to a purchaser. Since deductibles are usually expensive, it`s important that you make sure you know what you`re doing before you try to transfer your rights. This prevents a franchisor from taking action against you. This chapter examines the limits of treaties, judicial decisions and legislative initiatives. Restrictions contractually imposed on the franchisee do not constitute a "zero-sum game" in favour of the franchisee.

On the contrary, a balance is often found when the franchisor and the franchisee benefit from contractual conditions that allow for the resale, financing and expansion of valuable franchises. To date, no uniform contractual language has been developed that is acceptable to franchisors and franchisees. Judicial decisions and legislative decrees have also not established uniform expectations that apply to restitutions in all situations. This condition requires the payment of a fee that is either fixed or determined by a formula. The formula may include factors such as historical performance, remaining duration, or type of business unit. The fee may also be lower if the transfer is made to an existing franchisee, as an experienced franchisee may not require the franchisor to cover additional training costs. The court found that these pre-emptive rights were appropriate because they prevent unwanted interference by third parties in the company and protect its shareholders from business competitors or other persons who might buy its shares to acquire information that could then be used against the interests of the company. Applying the same principles to franchisor-franchisee situations, the Court noted that "the franchisor`s stock in the trade is its good reputation and business model. These are not only susceptible to the intrusion of strangers, but also . an insider insurrection whose acquisition may change the management or control of the franchisee. 29 Accordingly, the Court held that the right of first refusal enshrined in the franchise agreement was valid and, prudential Real Estate Affiliates having made its offer within the ten-day period provided for in the franchise agreement, it was entitled to the shares.30 Nine courts adopted legislation specifically relating to the transfer of a franchise: Arkansas, California, Hawaii, Indiana, Iowa, Michigan, Minnesota, Nebraska and New Jersey. These by-laws generally limit the franchisor`s discretion to refuse consent to a transfer.55 If a franchisor refers a potential acquirer to a selling franchisee, it is likely sufficient to invoke the Federal Trade Commission`s disclosure requirements because the interested party has contacted the franchisor. A franchisor may be required to disclose to the acquirer whether the franchisor has contacted a purchaser or is being approached by a purchaser "for the purpose of discussing the establishment" of a franchise relationship.54 Since franchisors have sales conversations with the potential buyer to facilitate the purchase, most franchisors regularly designate a resale buyer.

This may be impractical for some franchisors if, for example, the franchisor does not currently sell new franchises and does not have an updated offer circular available for disclosure. In order to minimise prosecution, the proposed acquirer should be required to file a formal application. The standard for approving the application should also be as objective as possible. The evaluation criterion may include: compliance with minimum financial criteria, good creditworthiness, relevant experience and solid character, and possibly evaluation or testing by third parties. A purchaser`s failure to submit a formal transfer request to the franchisor is a valid reason for the franchisor to refuse the transfer, and the courts will maintain franchise agreements that require the proposed transferee to meet the franchisor`s criteria for a new franchisee.15 The interview process should be formalized to provide reports on each interview and perhaps a note or note contain. With very few exceptions created by law, only the existing franchisee and not the proposed franchisee may be allowed to challenge a refusal of the transfer.16 For fixed concepts, the landlord`s consent may be required. A valuable condition that must be included in a franchise agreement is to obtain the consent of a landlord and require the landlord to pursue or re-enforce any option available to the franchisor to return or remarket the franchise in the event of the franchisee`s breach with the franchisor or landlord....