How is a 'controlling ownership interest' defined in the 7 Brew franchise agreement?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
levy, attachment, or execution by your creditors or any financial institution. Any security interest that may be created in this Agreement by virtue of Section 9-408 of the Uniform Commercial Code is limited as described in Section 9-408(d) of the Uniform Commercial Code.
C. Conditions for Approval of Transfer
If you and your owners are in full compliance with this Agreement, then, subject to this Section 16's other provisions:
- (1) We will approve the transfer of a non-controlling ownership interest in you if the proposed transferee and its owners are of good moral character, have no ownership interest in and do not perform services for (and have no affiliates with an ownership interest in or performing services for) a Competitive Business, otherwise meet our then-applicable standards for non-controlling owners of 7 BREW Store franchisees, sign our then-current form of Guaranty and Assumption of Obligations or, if applicable, Owner's Undertaking of Non-Monetary Obligations, and pay us a One Thousand Dollar ($1,000) transfer fee. The term "controlling ownership interest" is defined in Section 21.M.
- (2) If the proposed transfer involves the franchise rights granted by this Agreement or a controlling ownership interest in you or in an Entity owning a controlling ownership
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, the definition of "controlling ownership interest" can be found in Section 21.M of the franchise agreement. This is important because the franchisor's approval is required for transfers of a controlling ownership interest. Specifically, if a proposed transfer involves the franchise rights or a controlling ownership interest, or is one of a series of transfers that in aggregate transfer the franchise rights or a controlling ownership, the franchisor's approval is needed.
Transfers of non-controlling interests, on the other hand, are subject to less stringent requirements. The franchisor will approve the transfer of a non-controlling ownership interest if the proposed transferee is of good moral character, does not have an ownership interest in a Competitive Business, meets the franchisor's standards for non-controlling owners, signs the required Guaranty and Assumption of Obligations, and pays a $1,000 transfer fee.
Understanding the distinction between controlling and non-controlling interests is crucial for franchisees planning future ownership changes or business succession. Franchisees should carefully review Section 21.M of the franchise agreement to fully understand the definition and implications of transferring a controlling ownership interest in their 7 Brew franchise.