For 7 Brew, what is the definition of 'Approved Affiliate' in the context of development obligations?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) Approved Affiliates. To maintain your rights under this Rider, you (and/or Approved Affiliates) must by the deadlines specified in the Schedule construct, develop, and have open and operating within the Territory the agreed-upon minimum number of Traditional 7 BREW Stores. If your owners establish a new legal entity to operate one or more of the Traditional 7 BREW Stores to be developed pursuant to this Rider and that new legal entity's ownership is completely identical to your ownership, that legal entity automatically will be considered an "Approved Affiliate" without further action. However, if the new legal entity's ownership is not completely identical to your ownership, you first must seek our approval for that new entity to develop and operate the proposed Traditional 7 BREW Store as an Approved Affiliate. We may refuse any such request if you and/or your owners do not (a) own and control at least seventy-five percent (75%) of the new entity's ownership interests and (b) have the authority to exercise voting and management control of the Store proposed to be owned by the new entity.
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, an 'Approved Affiliate' is relevant when a franchisee intends to use a separate legal entity to operate one or more of the Traditional 7 Brew stores under a development schedule. If the ownership of the new legal entity is completely identical to the franchisee's ownership, the new entity is automatically considered an 'Approved Affiliate.'
However, if the ownership structure of the new legal entity differs from the franchisee's, the franchisee must seek approval from 7 Brew for the new entity to operate as an 'Approved Affiliate'. 7 Brew may deny this request if the franchisee and their owners do not own and control at least 75% of the new entity's ownership interests and lack the authority to exercise voting and management control of the store.
This stipulation ensures that 7 Brew maintains control over who operates stores under its brand. It also ensures that the franchisee maintains significant ownership and control over any affiliated entities. This requirement is designed to protect the brand's standards and reputation by ensuring consistent management and operational practices across all locations developed under the development agreement.