What restriction must be included in the governing documents of an entity operating a B Bops restaurant regarding ownership interests?
B_Bops Franchise · 2025 FDDAnswer from 2025 FDD Document
In the event Franchisee is a partnership (general or limited), corporation or limited liability company on the effective date of this Agreement, or if the Franchise or any ownership interest in Franchisee is thereafter transferred to a partnership,
corporation or limited liability company in accordance with the provisions of Section 19(A) hereof, such entity shall comply with the following:
(1) The entity shall be newly organized and its activities shall be confined exclusively to the development and operation of B-Bop's Restaurants pursuant to the terms of this Agreement or other franchise agreements with Company;
(2) The governing documents of such entity shall provide that the issuance or transfer of any ownership interests in such entity shall be subject to the restrictions contained in this Agreement;
(3) Any stock certificate or other evidence of ownership issued by such entity, shall have conspicuously endorsed upon it a statement that it is held subject to, and that further assignment or transfer thereof is subject to, all restrictions imposed upon transfer by this Agreement;
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2025 FDD)
According to B Bops's 2025 Franchise Disclosure Document, if a franchisee is a partnership, corporation, or limited liability company, the governing documents of that entity must state that the issuance or transfer of any ownership interests in the entity is subject to the restrictions outlined in the franchise agreement. This requirement ensures that B Bops maintains control over who owns and operates its franchises, even when the franchisee is a business entity.
This provision is designed to protect the B Bops brand and maintain consistency across all franchise locations. By requiring that ownership transfers be subject to the franchise agreement's restrictions, B Bops can prevent unwanted or unqualified individuals from gaining control of a franchise without their approval. This helps to ensure that all franchisees meet the company's standards and are committed to upholding the brand's reputation.
For a prospective B Bops franchisee, this means that if they plan to operate the franchise through a business entity, they must ensure that the entity's governing documents include the required language about ownership transfer restrictions. This is a critical step in setting up the franchise and complying with the terms of the franchise agreement. Failure to include this provision could result in a breach of contract and potential legal issues with B Bops.