Is the issuance of additional shares considered a transfer of the Belocal franchise agreement?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
For purposes of this Agreement, the term "transfer" shall mean any issuance, sale, assignment, gift, pledge, mortgage or any other encumbrance, transfer by bankruptcy, transfer by judicial order, merger, consolidation share exchange, or transfer by operation of law or otherwise, whether direct or indirect, voluntary or involuntary.
Any ownership or structural changes in Franchisee (including but not limited to, any merger; reorganization; transfer of shares, stock, or interests among owners; or issuance of additional shares or classes of stock or additional partnership interests) shall constitute and be deemed a transfer.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the issuance of additional shares is considered a transfer of the franchise agreement. Specifically, any ownership or structural changes in the franchisee, including the issuance of additional shares or classes of stock, constitutes a transfer. This means that a Belocal franchisee must obtain prior written consent from Belocal for such changes.
This requirement is significant because any transfer without Belocal's consent is considered a material breach of the franchise agreement, potentially leading to termination. The franchisee must apply to Belocal for consent, providing all required information for Belocal to assess the proposed transfer. Belocal has a reasonable period, not exceeding 30 days after receiving all requested information, to notify the franchisee of its decision.
Furthermore, if a franchisee engages in a transfer without complying with the agreement's provisions, they may be liable to pay Belocal transfer damages. These damages are equal to the greater of 15% of the price paid by the transferee or $25,000. This provision highlights the importance of adhering to the transfer requirements outlined in the franchise agreement to avoid substantial financial penalties.
For a prospective Belocal franchisee, this underscores the need to carefully plan for any potential changes in ownership structure, including the issuance of additional shares. It is crucial to understand and comply with the transfer provisions to maintain a good standing with Belocal and avoid penalties or breach of contract.