If an Aplus franchisee is a business entity, can the owners transfer their ownership interests among each other?
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 sign
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 their ownership interests among each other under specific conditions. This is permitted as long as the transfer does not involve a controlling interest and adheres to certain requirements. A "Controlling Interest" is defined as ownership of at least 51% of the shares or membership units, allowing the owners to dictate the entity's actions. Any interest less than this is considered a "Non-Controlling Interest."
To facilitate such a transfer among owners, Aplus requires that the franchisee provide advance notice of the transfer to the company. Additionally, Attachment C of the Development Agreement must be amended to accurately reflect the new ownership structure. Each new owner is also required to sign a Guaranty and Personal Undertaking, as outlined in Attachment D, ensuring they are bound by the obligations of the agreement. Furthermore, both the previous and new owners must sign a general release in favor of Aplus, and a $2,500 administrative fee must be paid to Aplus.
However, any transfer that involves the sale or transfer of the franchisee's interest in the Development Agreement or the sale of a Controlling Interest necessitates prior written consent from Aplus. This consent is not unreasonably withheld but may be conditional based on several factors, including the transferee meeting Aplus's qualifications and training requirements. This ensures that any significant change in ownership is vetted by Aplus to maintain the standards and integrity of the franchise system. Any transfer made without Aplus's prior written consent is considered null and void and constitutes a material breach of the Development Agreement.