What is the definition of a 'Control Transfer' for an Auntie Annes franchise?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
A "Control Transfer" means any Transfer of (i) this Agreement or any interest in this Agreement; (ii) the Franchised Business or all or substantially all of the Franchised Business's assets; or (iii) any Controlling Ownership Interest (defined below) in you (if you are an Entity), whether directly or indirectly through a transfer of legal or beneficial ownership interests in any Owner that is an Entity, and whether in one transaction or a series of related transactions, regardless of the time period over which these transactions take place.
References to a "Controlling Ownership Interest" in you mean either (i) 20% or more of your direct or indirect legal or beneficial ownership interests in your Entity or (ii) an interest the acquisition of which grants the power (whether directly or indirectly) to direct or cause the direction of management and polices of you or the Franchised Business to any individual or Entity, or group of individuals or Entities, that did not have that power before that acquisition.
Source: Item 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, a Control Transfer involves transferring significant control over the franchise. Specifically, it means any transfer of the Franchise Agreement itself, any interest in the agreement, the Franchised Business, or substantially all of the Franchised Business's assets. If the franchisee is an entity, it also includes the transfer of a Controlling Ownership Interest.
A Controlling Ownership Interest is defined as either 20% or more of the direct or indirect legal or beneficial ownership interests in the franchisee's entity. It also includes any interest that grants the power to direct the management and policies of the franchisee or the Franchised Business, whether directly or indirectly, to an individual or entity that did not previously have that power.
This definition is important for prospective Auntie Annes franchisees because it outlines the circumstances under which they would need to seek approval from Auntie Annes for a transfer of ownership or control. Failing to obtain prior written consent from Auntie Annes for a Control Transfer would be a breach of the Franchise Agreement and could result in termination of the agreement without an opportunity to cure the breach. This is a fairly standard clause in franchise agreements, as franchisors want to ensure that any new controlling party meets their standards and is capable of operating the franchise successfully.