Is a transfer of beneficial ownership of stock considered a 'transfer' under the 7 Brew franchise agreement?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
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;
- (3) any sale or exchange of voting interests or securities convertible to voting interests, or any management or other agreement granting the right (directly or indirectly) to exercise or control the exercise of any owner's voting rights or to control your (or an Entity with an ownership interest in you) or the Store's operations or affairs;
- (4) transfer in a divorce, insolvency, or Entity-dissolution proceeding or otherwise by operation of law;
- (5) transfer by will, declaration of or transfer in trust, or under the laws of intestate succession;
- (6) sale of the underlying real estate on which the Store's physical structure is located if such sale is completed alongside a sale of 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 and only for the purposes of the right-of-first-refusal described in Section 16.G(2)); or
- (7) pledge of this Agreement (to someone other than us) or of an ownership interest in you or your owners as security or collateral, foreclosure upon or attachment or seizure of the Store (including its physical structure), or your transfer, surrender, or loss of the Store's possession, control, or management.
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" is broadly defined and does include the transfer of beneficial ownership of stock. Specifically, the franchise agreement states that a transfer includes a voluntary, involuntary, direct, or indirect assignment, sale, gift, or other disposition. This broad definition is further clarified to include several specific events.
One of the events included in the definition of "transfer" is the transfer of record or beneficial ownership of stock or any other ownership interest. This also includes the right to receive, directly or indirectly, all or a portion of the profits, losses, or any capital appreciation relating to the 7 Brew store. This means that any change in who ultimately benefits from the ownership of the stock, even if the legal owner remains the same, is considered a transfer under the agreement.
Other events that constitute a transfer include mergers, consolidations, exchanges of ownership interests, issuance of additional ownership interests, redemption of ownership interests, sales or exchanges of voting interests, transfers in divorce or insolvency proceedings, transfers by will or trust, and the sale of the underlying real estate under specific conditions. Additionally, pledging the agreement or ownership interests as security, or the foreclosure upon or seizure of the store, also constitutes a transfer. This comprehensive definition ensures that 7 Brew has the right to approve virtually any change in ownership or control of the franchise.