If an Aplus franchisee is a business entity, can the owners transfer a non-controlling interest to a third party?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
n a general release in favor of Franchisor and in the form Franchisor requires; and (d) you pay to Franchisor a $1,500 administrative fee.
- 8.3. Transfer Among Owners; Transfer of Non-Controlling Interest. If you are a Business Entity, your Owners may transfer their ownership interests in the Business Entity among each other, and may transfer up to a Non-Controlling Interest in the Business Entity to one or more third parties, if: (a) you have provided to Franchisor advance notice of the transfer; (b) Attachment C to this Agreement has been amended to reflect the new ownership; (c) each new Owner has signed a Guaranty and Personal Undertaking in the form of Attachment D; (d) each previous and/or new Owner has signed a general release in favor of Franchisor and in the form Franchisor requires, and (d) you pay to Franchisor a $2,500 administrative fee.
- 8.4. Transfer of Agreement; Transfer of Controlling Interest.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, if the franchisee is a business entity, the owners can transfer a non-controlling interest to a third party under certain conditions. A non-controlling interest is defined as any interest less than 51% of the corporation, limited liability company, or partnership.
The conditions for transferring a non-controlling interest include providing advance notice to Aplus, amending Attachment C of the agreement to reflect the new ownership, ensuring each new owner signs a Guaranty and Personal Undertaking in the form of Attachment D, securing a general release in favor of Aplus from each previous and/or new owner, and paying Aplus a $2,500 administrative fee.
These stipulations ensure that Aplus maintains control over who is involved in the franchise and that all parties are bound by the franchise agreement's terms. The administrative fee likely covers Aplus's costs for reviewing and processing the transfer documentation.
It is important for prospective Aplus franchisees who are business entities to understand these transfer requirements, as failure to comply could result in a breach of the franchise agreement. Franchisees should carefully review Attachment C and Attachment D to fully understand the obligations and requirements related to ownership changes.