What constitutes a 'Controlling Interest' if the Aplus developer is a partnership?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
- "Controlling Interest" means: (a) if you are a corporation, limited liability company, or other corporate entity that the Owners, either individually or cumulatively (i) directly or indirectly own at least 51% of the shares of each class of the developer entity's issued and outstanding capital stock or membership units, as applicable; and (ii) are entitled, under its governing documents and under any agreements among the Owners, to cast a sufficient number of votes to require such entity to take or omit to take any action which such entity is required to take or omit to take under this Agreement; or (b) if you are a partnership, that the Owners (i) own at least 51% interest in the operating profits and operating losses of the partnership as well as at least 51% ownership interest in the partnership (and at least 51% interest in the shares of each class of capital stock of any corporate general partner); and (ii) are entitled under its partnership agreement or applicable law to act on behalf of the partnership without the approval or consent of any other partner or be able to cast a sufficient number of votes to require the partnership to take or omit to take any action which the partnership is required to take or omit to take under this Agreement.
Any interest less than 51% of the corporation, limited liability company, or partnership is a "Non-Controlling Interest."
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, a 'Controlling Interest' for a partnership is defined by two key criteria. First, the owners must possess at least 51% interest in both the operating profits and operating losses of the partnership, as well as at least 51% ownership interest in the partnership itself, including at least 51% interest in the shares of each class of capital stock of any corporate general partner.
Second, the owners must be entitled, either through the partnership agreement or applicable law, to act on behalf of the partnership without needing approval or consent from any other partner. Alternatively, they must be able to cast a sufficient number of votes to compel the partnership to take or omit any action required under the Development Agreement.
In essence, Aplus requires that a partnership's owners with a 'Controlling Interest' have both significant financial stake and decision-making power within the partnership to ensure alignment with the Development Agreement. Any interest less than 51% in a partnership constitutes a 'Non-Controlling Interest'.