How is a 'controlling ownership interest' defined in the Big Blue Swim School DRA?
Big_Blue_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
9. Assignment.
(a) Your development rights under this DRA are not assignable at all. This means we will not under any circumstances allow the development rights to be transferred. A transfer of the development rights would be deemed to occur (and would be prohibited) if there is an assignment of this DRA, a transfer of a controlling ownership interest in you or in an entity with a controlling ownership interest in you, or any other event attempting to assign the development rights. An assignment (direct or indirect) of only a non-controlling ownership interest in you is permitted (and would not be deemed to be a transfer of your development rights). References to a "controlling ownership interest" in you or one of your owners (if an entity) mean the percent of voting shares or other voting rights resulting from dividing one hundred percent (100%) of the ownership interests by the number of owners. In the case of a proposed transfer of an ownership interest in you or one of your owners, whether a "controlling ownership interest" is involved must be determined both immediately before and immediately after the proposed transfer to see if a "controlling ownership interest" will be transferred (because of the number of owners before the proposed transfer) or will be deemed to have been transferred (because of the number of owners after the proposed transfer).
Source: Item 23 — RECEIPTS (FDD pages 76–278)
What This Means (2025 FDD)
According to Big Blue Swim School's 2025 Franchise Disclosure Document, a 'controlling ownership interest' in you or one of your owners (if an entity) is defined as the percent of voting shares or other voting rights resulting from dividing one hundred percent (100%) of the ownership interests by the number of owners.
This definition is relevant in the context of transferring ownership interests. The document specifies that the development rights under the DRA are not assignable, meaning Big Blue Swim School will not allow these rights to be transferred under any circumstances. A transfer of development rights is deemed to occur if there is an assignment of the DRA, a transfer of a controlling ownership interest in the franchisee or an entity with a controlling ownership interest in the franchisee, or any other event attempting to assign the development rights. However, the assignment of a non-controlling ownership interest is permitted.
In the case of a proposed transfer of ownership, whether a 'controlling ownership interest' is involved is determined both immediately before and immediately after the proposed transfer. This is to ascertain if a 'controlling ownership interest' will be transferred due to the number of owners before the transfer, or will be deemed to have been transferred because of the number of owners after the proposed transfer. This clause aims to prevent indirect transfers of development rights by manipulating ownership percentages.