What is the consequence if the proposed 7 Brew transferee has an ownership interest in a Competitive Business?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
series of transfers (regardless of the timeframe over which those transfers take place) in the aggregate transferring the franchise rights granted by this Agreement or a controlling ownership interest in you or in an Entity owning a controlling ownership interest in you, then we will not
unreasonably withhold our approval of a proposed transfer meeting all of the following conditions:
- a. on both the date you send us the transfer request and the transfer's proposed effective date: (i) the transferee and its direct and indirect owners have the necessary business experience, aptitude, and financial resources to operate the Store; (ii) the transferee otherwise is qualified under our then-existing standards for the approval of new franchisees or of existing franchisees interested in acquiring additional franchises (including the transferee and its affiliates are in substantial operational compliance, at the time of the application, under all other franchise agreements for 7 BREW Stores to which they then are parties with us); and (iii) the transferee and its owners are not restricted by another agreement (whether or not with us) from purchasing the Store or the ownership interest in you or the Entity that owns a controlling ownership interest in you;
- b. on both the date you send us the transfer request and the transfer's proposed effective date, you have paid all required Royalties, Brand Fund contributions, Tech Fees, and other amounts owed to us and our affiliates relating to this Agreement and the Store, have submitted all required reports and statements, and are not in breach of any provision of this Agreement or another agreement with us or our affiliates relating to the Store;
- c. on both the date you send us the transfer request and the transfer's proposed effective date, neither the transferee nor any of its direct or indirect owners or affiliates operates, has an ownership interest in, or performs services for a Competitive Business;
- d. before or after the transfer's proposed effective date (as we determine), the transferee's management personnel, if different from your management personnel, satisfactorily complete our then-current Initial Training;
- e.
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, if a proposed transferee or any of their direct or indirect owners or affiliates operates, has an ownership interest in, or performs services for a Competitive Business, both on the date the transfer request is sent and on the proposed effective date of the transfer, 7 Brew can withhold approval of the transfer.
A "Competitive Business" is defined as any business that derives more than 25% of its revenue from selling coffee, or any business granting franchises or licenses to others to operate that type of business, excluding other 7 Brew stores operated under a franchise agreement with 7 Brew. However, the restriction does not prohibit ownership of shares of a class of securities publicly-traded on a United States stock exchange and representing less than 3% of the number of shares of that class of securities issued and outstanding.
This condition ensures that new 7 Brew franchisees are fully committed to the 7 Brew brand and do not have conflicting business interests that could potentially harm the 7 Brew system. A prospective franchisee should fully disclose any existing business affiliations or ownership interests to 7 Brew during the application process to avoid any issues with transfer approval.