Is the sale of capital stock in the franchisee considered a transfer requiring Annex Brands' approval?

According to Annex Brands' 2025 Franchise Disclosure Document, the sale of capital stock is considered a transfer that requires franchisor approval. Specifically, any sale, gift, or other transfer of capital stock, or of a partnership, LLC, or other ownership interest in the franchisee, is subject to Annex Brands' approval. This also includes the merger or consolidation of the franchisee with another corporation, or the issuance of capital stock, partnership, LLC, or other ownership interests in the franchisee.

This requirement means that if a franchisee wishes to sell their capital stock or any portion of their ownership interest in the franchise, they must first obtain written approval from Annex Brands. This provision allows Annex Brands to maintain control over who becomes a franchisee and ensures that new owners meet their standards for franchisees. Annex Brands will assess the proposed transferee to ensure they meet the then-applicable standards for franchisees and are of good moral character.

Annex Brands will not unreasonably withhold approval of a transfer request if the franchisee and its owners are in full compliance with the franchise agreement and all other agreements with Annex Brands. However, if the transfer involves a controlling interest in the franchisee, additional conditions must be met, such as the transferee executing the then-current franchise agreement. This ensures that the new controlling party is fully bound by the obligations of the franchise agreement. Any transfer without Annex Brands' prior written approval constitutes a default of the agreement and conveys no rights to the franchise or related assets to the unauthorized transferee.

Prospective franchisees should be aware of these transfer restrictions, as they can impact the ability to sell or transfer ownership in the future. It is important to maintain compliance with the franchise agreement and understand the conditions under which Annex Brands will approve a transfer. Franchisees should also be aware of Annex Brands' right of first refusal, which allows Annex Brands to purchase the franchise interest on the same terms as a third-party offer.