Under the 7 Brew franchise agreement, what is the definition of 'Affiliate'?
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 the 2025 7 Brew Franchise Disclosure Document, an 'Approved Affiliate' is defined in the context of development obligations for franchisees who plan to open multiple 7 Brew stores. Specifically, if a franchisee's owners establish a new legal entity to operate one or more 7 Brew stores, and the ownership of that new entity is completely identical to the franchisee's ownership, the new legal entity is automatically considered an 'Approved Affiliate.' This allows the affiliate to fulfill development requirements under the original franchise agreement.
However, if the ownership of the new legal entity is not completely identical to the franchisee's ownership, the franchisee must seek approval from 7 Brew for the new entity to operate as an 'Approved Affiliate.' 7 Brew may refuse this request if the franchisee and/or 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 proposed to be owned by the new entity. This stipulation ensures that the original franchisee maintains significant control over the affiliated entity.
In practical terms, this means that a 7 Brew franchisee looking to expand through a separate legal entity must maintain at least 75% ownership and control to gain approval as an 'Approved Affiliate.' This requirement protects 7 Brew's interests by ensuring consistent management and brand standards across all franchised locations, even those operated by affiliated entities. Franchisees should carefully consider these ownership and control requirements when structuring any new legal entities for expansion.