What is a 'Controlled Entity' in the context of a 360 Painting franchise transfer?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall not subfranchise, sell, assign, transfer, merge, convey or encumber, in whole or in part (each, a "Transfer"), the Business, the Vehicles, this Agreement or any of its rights or obligations hereunder, or suffer or permit any such Transfer of the Business, the Vehicles, this Agreement or its rights or obligations hereunder to occur by operation of law or otherwise without the prior express written consent of Franchisor. In addition, if Franchisee is a corporation, limited liability company, partnership, business trust, or similar association or entity, the shareholders, members, partners, beneficiaries, investors or other equity holders, as the case may be, may not Transfer their equity interests in such corporation, limited liability company, partnership, business trust, or similar association or entity, without the prior written consent of Franchisor. Furthermore, in the event that any shareholder, member, partner, investor or other direct or indirect equity holder of Franchisee (the "Equity Holder") is a corporation, limited liability company, partnership, business trust, or similar association or entity, the interests of the shareholders, members, partners, beneficiaries, investors or other equity holders, as the case may be, in such Equity Holder, may not be Transferred, without the prior written consent of Franchisor. Any Transfer in violation of this Section shall be void and of no force and effect, will be ineffective against Franchisor and will constitute a material default hereunder. If Franchisee or an Equity Holder is a corporation, limited liability company, partnership, business trust, or similar association or entity with certificated equity interests, all stock or equity certificates of Franchisee or Equity Holder shall have conspicuously endorsed upon them a legend in substantially the following form:
"A transfer of this stock is subject to the terms and conditions of a 360 Painting, LLC FRANCHISE AGREEMENT dated the day of," Franchisor's consent to a Transfer of any interest in this Agreement, or of any direct or indirect ownership interest in the Franchisee, an Equity Holder or any owner thereof, shall not constitute a waiver of any claims Franchisor may have against Franchisee, the transferor or the transferee, nor shall it be deemed a waiver of Franchisor's right to demand compliance with the terms of this Agreement.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
I am unable to provide information about what constitutes a 'Controlled Entity' in the context of a 360 Painting franchise transfer, according to the 2025 Franchise Disclosure Document. While the document discusses franchise transfers and the franchisor's consent rights, it does not define or use the term 'Controlled Entity'.
However, the 360 Painting FDD does address the transfer of equity interests in the franchisee entity. Specifically, if the franchisee is a corporation, limited liability company, partnership, business trust, or similar entity, the equity holders may not transfer their interests without the franchisor's prior written consent. This requirement extends to situations where an equity holder is itself an entity, meaning that transfers of interests in that entity also require the franchisor's approval.
To fully understand the implications of transferring a 360 Painting franchise, prospective franchisees should seek clarification from the franchisor regarding what specific types of entities or ownership structures would be subject to transfer restrictions. Understanding these requirements is crucial for planning purposes and to avoid inadvertently violating the franchise agreement.