Can a Big Blue Swim School franchise be transferred to an entity that operates a Competitive Business?
Big_Blue_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
- (c) on both the date you send us the transfer request and the transfer's proposed effective date, neither the transferee nor any of its direct or indirect owners or affiliates operates, has an ownership interest in, or performs services for a Competitive Business;
The term "Competitive Business," as used in this Agreement, means any (a) business that provides swim lessons, swim skills, or swim activities for children ranging in age from three (3) months to twelve (12) years old, or (b) business granting franchises or licenses to others to operate the type of business described in clause (a), other than a BIG BLUE Swim School operated under a franchise agreement with us.
- (1) have any direct or indirect, controlling or non-controlling interest as an owner—whether of record, beneficial, or otherwise—in a Competitive Business (defined below), wherever located or operating, provided that this restriction will not prohibit ownership of shares of a class of securities publicly-traded on a United States stock exchange and representing less than three percent (3%) of the number of shares of that class of securities issued and outstanding;
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to Big Blue Swim School's 2025 Franchise Disclosure Document, transferring a franchise to an entity involved in a competitive business is restricted. Specifically, the document states that on the date of the transfer request and the proposed effective date, neither the transferee nor any of its direct or indirect owners or affiliates can operate, have an ownership interest in, or perform services for a Competitive Business.
The FDD defines a "Competitive Business" as any business that provides swim lessons, swim skills, or swim activities for children aged three months to twelve years, or any business that grants franchises or licenses to others to operate such a business, excluding other Big Blue Swim School franchises. This definition is crucial for prospective franchisees to understand, as it broadly encompasses various swim-related businesses that could be considered competitive.
However, there is an exception regarding ownership of publicly-traded securities. The restriction does not prohibit ownership of shares of a class of securities publicly-traded on a United States stock exchange, provided that the ownership represents less than three percent (3%) of the outstanding shares of that class. This allows for minor investments in publicly-traded companies that might technically be considered competitive without violating the transfer conditions. Therefore, a prospective franchisee needs to ensure that any potential transferee is not substantially involved in a competing swim school business to secure approval for the transfer.