Does the 7 Brew definition of 'transfer' include the sale or exchange of voting interests?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
transfer scenarios described in Section 16.G below, including if title to the underlying real estate on which the Store's physical structure is located is to be sold along with the Store (but only if you or one or more of your owners, directly or through another entity, hold title to that underlying real estate).
In this Agreement, the term "transfer" includes a voluntary, involuntary, direct, or indirect assignment, sale, gift, or other disposition, including the following events:
- (1) transfer of record or beneficial ownership of stock or any other ownership interest or the right to receive (directly or indirectly) all or a portion of the profits, losses, or any capital appreciation relating to the Store;
- (2) a merger, consolidation, or exchange of ownership interests, issuance of additional ownership interests or securities representing or potentially representing ownership interests, or a redemption of ownership interests;
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, the term 'transfer' does include the sale or exchange of voting interests. This definition is important for prospective franchisees to understand, as any action that falls under this broad definition will be subject to the transfer conditions outlined in the franchise agreement.
The 7 Brew FDD specifies that 'transfer' encompasses both direct and indirect dispositions, including voluntary and involuntary actions. This includes not only the obvious sales or gifts but also more complex scenarios like mergers, consolidations, or the issuance of additional ownership interests. The inclusion of these events ensures that 7 Brew retains control over who its franchisees are and how the ownership of the franchise is structured.
Specifically, the definition calls out 'any sale or exchange of voting interests or securities convertible to voting interests.' This means that if a franchisee sells shares in their 7 Brew business that allow the new owner to vote on company matters, or if they sell securities that can be converted into voting shares, it is considered a transfer under the agreement. Furthermore, any agreement that grants someone the right to control the exercise of voting rights or the operations of the store also constitutes a transfer. This provision is designed to prevent franchisees from circumventing the transfer restrictions by ceding control to another party without formally transferring ownership.
For a prospective 7 Brew franchisee, this comprehensive definition of 'transfer' means that they must seek approval from 7 Brew for a wide range of ownership changes, not just outright sales. Failing to obtain approval for a transfer can result in a breach of the franchise agreement, potentially leading to termination of the franchise. Therefore, it is crucial for franchisees to carefully review the transfer provisions and consult with legal counsel before making any changes to their ownership structure or control.