What is the purpose of the legend on stock certificates for a Big O Tires franchise?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Big O has granted the Franchise in reliance on Franchisee's personal background, business skills, experience, and financial capacity. It is important to Big O that Franchisee be known to Big O and always meet Big O's standards and requirements. Accordingly, neither Franchisee nor any Owner shall be permitted or have the power, without the prior written consent of Big O, to make any Transfer. To assure compliance by Franchisee with the transfer restrictions contained in this Section 18, all share or stock certificates of Franchisee, or other evidence of ownership in a Franchisee which is an Entity, shall at all times contain a legend sufficient under applicable law to constitute notice of the restrictions on such stock, or other said evidence of ownership, contained in this Agreement and to allow such restrictions to be enforceable. Such legend shall appear in substantially the following form:
The sale, transfer, pledge, or hypothecation of this [stock] is restricted pursuant to the terms of Section 18 of a Franchise Agreement dated between Big O Tires, LLC, and the issuer of these [shares].
Any Transfer that does not comply with the terms of this Section 18 shall be null and void.
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
According to the 2025 Big O Tires Franchise Disclosure Document, the legend on stock certificates is to ensure compliance with transfer restrictions outlined in the franchise agreement. Big O Tires emphasizes that the rights and duties within the agreement are personal to the franchisee. The company grants the franchise based on the franchisee's background, skills, experience, and financial capacity.
Big O Tires requires that all share or stock certificates, or any ownership evidence for franchisees that are entities, contain a legend. This legend serves as a notice, under applicable law, of the restrictions on the stock or ownership as detailed in Section 18 of the franchise agreement. The legend ensures these transfer restrictions are enforceable.
The specific language of the legend states: "The sale, transfer, pledge, or hypothecation of this [stock] is restricted pursuant to the terms of Section 18 of a Franchise Agreement dated between Big O Tires, LLC, and the issuer of these [shares]." Any transfer that does not comply with Section 18 of the agreement is considered null and void, protecting Big O Tires's interests.
This requirement is typical in franchising, as franchisors want to control who becomes a franchisee to protect their brand and system. Prospective Big O Tires franchisees should carefully review Section 18 of the franchise agreement to fully understand these transfer restrictions and how they might affect their ability to sell or transfer their franchise interest in the future.