What is the definition of 'controlling ownership interest' 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" is found in Section 21.M of the franchise agreement. When transferring ownership, 7 Brew distinguishes between transfers of non-controlling and controlling interests. Specifically, if a proposed transfer involves the franchise rights or a controlling ownership interest, or is one of a series of transfers that cumulatively transfer the franchise rights or a controlling ownership interest, 7 Brew will review the transfer request, and will not unreasonably withhold approval if certain conditions are met.
For a prospective franchisee, this means that transferring a significant portion of their ownership or the franchise rights themselves requires franchisor approval. 7 Brew retains the right to vet potential new owners to ensure they meet the brand's standards and do not have conflicts of interest, such as involvement with a competing business. This protects the 7 Brew brand and the interests of other franchisees.
It is important for franchisees to understand the implications of transferring ownership, as unauthorized transfers can lead to breaches of the franchise agreement. Franchisees should carefully review Section 21.M and consult with 7 Brew to ensure compliance with the transfer requirements. Understanding these conditions is crucial for managing the franchise and planning for potential future changes in ownership.