Must all obligations of the franchisee to 360 Painting be fully paid and satisfied before a transfer to a Controlled Entity?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
17.2 Assignment by Franchisee. 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 ineffec
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
The 2025 Franchise Disclosure Document (FDD) for 360 Painting does not explicitly state whether all obligations of the franchisee must be fully paid and satisfied before a transfer to a Controlled Entity. However, the FDD does state that a franchisee cannot transfer the franchise without prior written consent from 360 Painting.
Item 17.2 discusses the conditions regarding the assignment of the franchise agreement by the franchisee. It states that the franchisee cannot transfer the business, vehicles, the agreement, or any rights or obligations without the prior express written consent of 360 Painting. This requirement extends to equity holders within the franchisee's business structure, such as shareholders or members, who also cannot transfer their equity interests without 360 Painting's prior written consent. Any transfer that violates this section is considered void and without effect.
While the FDD does not directly address the specific requirement of fully paid obligations for transfers to a Controlled Entity, the broad restrictions on transfer without consent suggest that 360 Painting has significant control over who can become a franchisee and under what conditions. A prospective franchisee should clarify with 360 Painting the specific conditions required for transfer, including whether all financial obligations must be met, to ensure a smooth transfer process.