For All States M.E.D., what happens if a Controlled Entity amends its governing documents?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
18.3.1 If Franchisee wishes to transfer this Agreement or any interest herein to a corporation, limited liability company or other legal entity which shall be entirely owned by Franchisee ("Controlled Entity"), which Controlled Entity is being formed for the financial planning, tax or other convenience of Franchisee, Franchisor's consent to such transfer shall be conditioned upon the satisfaction of the following requirements:
- (a) the Controlled Entity is newly organized and its charter or articles of formation provides that its activities are confined exclusively to the operation of the Franchised Business;
Source: Item 23 — RECEIPTS (FDD pages 44–174)
What This Means (2024 FDD)
The 2024 All States M.E.D. Franchise Disclosure Document outlines the requirements for transferring a franchise to a Controlled Entity, which is a corporation, limited liability company, or other legal entity entirely owned by the franchisee. According to section 18.3.1(a), the charter or articles of formation for the Controlled Entity must stipulate that its activities are exclusively confined to operating the franchised All States M.E.D. business.
However, the document does not explicitly state the consequences if the Controlled Entity amends its governing documents after the transfer. It is implied that any amendment that violates the initial condition—that the entity's activities remain exclusively focused on the All States M.E.D. business—could be a breach of the franchise agreement.
Prospective All States M.E.D. franchisees should seek clarification from the franchisor regarding the specific repercussions of amending the Controlled Entity's governing documents. Understanding the franchisor's policies on this matter is crucial for maintaining compliance and avoiding potential disputes or termination of the franchise agreement.