Can a 7 Brew franchise transfer be approved if the transferee operates a Competitive Business?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
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;
(1) have any direct or indirect, controlling or non-controlling interest as an owner whether of record, beneficial, or otherwise—in a Competitive Business (defined below), wherever located or operating, provided that this restriction will not prohibit ownership of shares of a class of securities publicly-traded on a United States stock exchange and representing less than three percent (3%) of the number of shares of that class of securities issued and outstanding;
The term "Competitive Business," as used in this Agreement, means any (a) business that derives more than twenty-five percent (25%) of its revenue from selling coffee, or (b) business granting franchises or licenses to others to operate the type of business described in clause (a), other than a 7 BREW Store operated under a franchise agreement with us.
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, a transfer of a 7 Brew franchise may not be approved if the transferee or their owners operate a Competitive Business. Specifically, on the date of the transfer request and the proposed effective date, neither the transferee nor any of their direct or indirect owners or affiliates can operate, have an ownership interest in, or perform services for a Competitive Business.
The FDD defines a "Competitive Business" 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 such a business, other than a 7 Brew Store 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 three percent (3%) of the number of shares of that class of securities issued and outstanding.
This condition ensures that potential franchisees are fully committed to the 7 Brew system and brand, and that they are not simultaneously involved in operating or supporting competing businesses. This is a fairly standard practice in franchising, as franchisors want to avoid conflicts of interest and ensure that franchisees are focused on growing the 7 Brew brand. A prospective franchisee should carefully review the definition of "Competitive Business" in the Franchise Agreement to fully understand the scope of this restriction.