Can an Aw franchisee transfer their franchise through the issuance of additional securities without Aw's prior written approval?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.2 By Franchisee With Approval. You understand and acknowledge that the rights and duties created by this Agreement are personal to you and we have granted the franchise in reliance upon the individual or collective character, skill, aptitude, attitude, business ability and financial capacity of you (and your Owners). Therefore, except as otherwise provided in Paragraph 14.5 below, neither the franchise, your Papa Ray's Pizza Restaurant or a substantial portion of the assets of your Papa Ray's Pizza Restaurant (or any interest therein) nor any part or all of the ownership of an entity that is the Franchisee may be voluntarily, involuntarily, directly or indirectly, assigned, sold, subdivided, subfranchised or otherwise transferred by you or your Owners (including, without limitation, by merger or consolidation, by issuance of additional securities representing an ownership interest in the Franchisee, or in the event of the death of the Franchisee or an Owner of the Franchisee, by will, declaration of or transfer in trust or the laws of intestate succession) without our prior written
approval. Further, neither your Papa Ray's Pizza Restaurant nor a substantial portion of its assets may be transferred without a concurrent transfer of this Agreement and the franchise rights granted hereunder to the same transferee. Any such assignment or transfer without our prior written approval will constitute a breach of this Agreement and will convey no rights to or interests in the franchise, the franchisee entity, your Papa Ray's Pizza Restaurant or its assets.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, a franchisee cannot transfer their franchise through the issuance of additional securities without prior written approval from Aw. Specifically, Item 14.2 states that neither the franchise, the Papa Ray's Pizza Restaurant, nor a substantial portion of the assets, including any interest therein, can be assigned, sold, or transferred without Aw's prior written approval. This restriction extends to transfers made through the issuance of additional securities representing an ownership interest in the franchisee.
This requirement means that if a franchisee wishes to raise capital by issuing additional securities that would alter the ownership structure of the franchise, they must first seek and obtain written approval from Aw. This provision allows Aw to maintain control over who owns and operates its franchises, ensuring that new owners meet their standards and qualifications.
The FDD specifies that any assignment or transfer without Aw's prior written approval constitutes a breach of the Franchise Agreement and conveys no rights or interests in the franchise. This underscores the importance of obtaining approval before making any changes to the ownership structure of the franchise, including through the issuance of additional securities.