Under what conditions can 360 Painting withhold consent to a franchise transfer?
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 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)
According to 360 Painting's 2025 Franchise Disclosure Document, a franchisee cannot subfranchise, sell, assign, transfer, merge, convey, or encumber the business, vehicles, or the Franchise Agreement without the prior express written consent of 360 Painting. This restriction extends to any rights or obligations under the agreement. If the franchisee is a corporation, limited liability company, partnership, business trust, or similar entity, the equity holders also cannot transfer their equity interests without 360 Painting's prior written consent. This requirement extends further if any equity holder is an entity, requiring consent for transfers of interests in that entity as well. Any transfer that violates these conditions is considered void and a material default of the agreement.
To ensure compliance, 360 Painting requires that all stock or equity certificates of the franchisee or equity holder bear a legend indicating that the transfer of stock is subject to the terms and conditions of the 360 Painting Franchise Agreement. Even if 360 Painting consents to a transfer, this does not waive any claims they may have against the franchisee, transferor, or transferee, nor does it waive their right to demand compliance with the terms of the agreement.
This level of control over franchise transfers is common in franchising to ensure that new operators meet the franchisor's standards and protect the brand. Prospective 360 Painting franchisees should carefully consider these restrictions, as they could impact their ability to exit the business or transfer ownership in the future. It is important to understand the conditions under which 360 Painting might withhold consent and to assess the potential implications for long-term business plans.