What is the definition of 'controlling interest' in the context of a B Bops franchise?
B_Bops Franchise · 2025 FDDAnswer from 2025 FDD Document
If Company elects not to exercise the right of first refusal and the terms of the unaccepted offer are altered in any material nature, Company shall, in each instance, be notified in writing of the revised offer and shall again have thirty (30) days to purchase the Franchise or such partner's, shareholder's or member's interest in Franchisee on the revised terms.
- E.
Ownership Changes.
If Franchisee is a partnership, corporation or limited liability company, Franchisee agrees to notify Company of any change in ownership interests in Franchisee which, when taken alone or together with all previous or simultaneous changes of ownership during the Term hereof, constitutes a change of ten percent (10%) or more of the ownership interests in Franchisee.
Any change in ownership interests which, when taken alone or together with all previous or simultaneous changes in ownership during the Term hereof, constitutes a change of fifty percent (50%) or more of the ownership interests in Franchisee shall be considered a transfer subject to the provisions of Section 19(C) and 19(D) hereof.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2025 FDD)
According to B Bops's 2025 Franchise Disclosure Document, a change of fifty percent (50%) or more of the ownership interests in the franchisee is considered a transfer subject to specific provisions within the franchise agreement. This definition applies when the franchisee is a partnership, corporation, or limited liability company.
This means that if a franchisee's ownership structure changes by 50% or more during the term of the agreement, B Bops considers it a significant event, triggering certain requirements. Specifically, such a change is treated as a transfer of the franchise itself, which necessitates adherence to the transfer provisions outlined in Sections 19(C) and 19(D) of the franchise agreement. These sections likely involve B Bops's approval, potential transfer fees, and other conditions designed to ensure the new ownership is suitable and committed to upholding the brand's standards.
For a prospective B Bops franchisee, this clause highlights the importance of carefully planning the ownership structure and any potential future changes. Any planned transfer of ownership interests that reaches the 50% threshold will require navigating the procedures detailed in Sections 19(C) and 19(D) of the franchise agreement, which could involve delays or additional costs. It is crucial to understand these provisions fully before entering into the franchise agreement to avoid unexpected complications related to ownership changes.
It's important to note that changes of ten percent (10%) or more must also be reported to B Bops. While these smaller changes do not trigger the transfer provisions, they do require notification to the company, ensuring B Bops is aware of any shifts in the franchisee's ownership structure.