The franchisor compliance manual

Transfer

The Code does not provide a franchisee with an automatic right to transfer their franchise agreement to a third party. What the Code does is provide a process by which a franchisee may seek your consent to a transfer.

Under the Code, a franchisee may request your consent to transfer a franchise agreement. Such a request must be in writing and accompanied by all the information that you would reasonably require and expect to be given to make an informed decision. If you require further information to make your decision, you can request in writing that the franchisee provide the necessary information to you.

You must advise in writing whether you consent to the transfer and whether consent is subject to any conditions. You may revoke your consent to the transfer within 14 days of granting it by advising the party in writing that consent is revoked and setting out the reasons. You must not unreasonably revoke your consent to a transfer.

If you do not consent to the transfer, you must advise the party in writing and set out reasons why not.

You will be taken to have consented to the transfer if you do not object to the transfer within 42 days of receiving the franchisee’s written request (or if you have requested further information, the date the information was provided to you). Your consent cannot be revoked in these circumstances.

You must not unreasonably withhold consent to the transfer of a franchise agreement. Circumstances in which you may reasonably withhold consent include:

Where the proposed transferee: Where the franchisee:
  • is unlikely to be able to meet the financial obligations of the franchise agreement
  • does not meet a reasonable requirement of the franchise agreement for the transfer of the agreement
  • does not meet the selection criteria of the franchisor
  • does not agree, in writing, to comply with the obligations of the franchisee under the franchise agreement.
  • has not paid or made reasonable provision to pay an amount owing to the franchisor
  • has not remedied a breach of the franchise agreement
  • has not provided to the franchisor a written statement that the transferee has received, read and had a reasonable opportunity to understand the disclosure document and the Code.

Care should be taken when exercising this discretion to avoid the possibility of breaching your obligation to act in good faith.

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