Assignment Clause In Franchise Agreement

Since franchisors and franchisees are often very busy, some of the formalities set out in the franchise agreement are sometimes not followed to the letter in the schedules it has planned (especially if these periods are a little unrealistic). Transfers offer the opportunity to improve the franchise system. The minimum expectation is that the proposed purchaser is at least as qualified as a new interested in a new franchise, as published in the current disclosure document or in the policy manual.8 It is tempting to reduce transfer standards because the seller is highly motivated or may fail, and to eliminate the risk and delay in building a new outlet on a new site. Nevertheless, the purchaser`s requirement to meet the minimum requirements of new franchisees creates a clear test and reduces subjectivity in the transmission process. This light line test reduces the possibility that a claim by the consent to transmission will be improperly withheld or delayed. Even in cases where state statutes restrict a franchisor`s assessment in the event of a refusal to transfer, the same statutes often explicitly allow a franchisor to find that a franchisee is unacceptable for essential reasons of financial nature,9 financial opportunities, 10 language skills, 11 or business experience. they declared themselves inappropriate. At Portaluppi v. Shell Oil Co., for example, a son offered to transfer his franchise to his father, who had no prior experience in the company.13 The father also admitted that the franchise had been acquired in favour of the son whose franchise had been revoked because of a drug conviction. In this case, the Tribunal found that the franchisor`s refusal to authorize the transfer was appropriate under the Virginia Petroleum Products Franchise Act.

In Sun Refining and Marketing Co., v. Brooks-Maupin Car Centers, Inc., a franchisor refused a service-station-franchise transfer due to the lack of commercial experience of the proposed purchaser, and the refusal was upheld.14 Courts respect the need for a franchisor to know when a transfer will take place and to whom the franchise will be transferred. A franchisee`s failure to inform its franchisor of a transfer is also a valid reason for a franchisor to refuse permission for a transfer. In Simmons v. General Motors Corp.34, the franchisee`s non-informing the franchisor of an attempt to transfer the franchise to a potential acquirer was considered a “substantial breach” of the franchise agreement.35 The same goes for online sales, whether by the franchisor or by a franchisee.