Are mergers, stock redemptions, consolidations, reorganizations, recapitalizations or other transfer control of the Black Bear Diner developer considered a Transfer?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
- 7.2.1 If Developer is a corporation, limited liability company, partnership, or limited liability partnership, each principal of Developer with at least a ten percent (10%) equity ownership interest in Developer ("Principal"), and the interest of each Principal in Developer, is identified in Exhibit C hereto.
Developer represents and warrants that its owners are as set forth on Exhibit C attached to this Agreement, and covenants that it will not permit the identity of such owners, or their respective interests in Developer, to change without complying with this Agreement.
Franchisor shall have the right to designate any person or entity which owns a direct or indirect interest in Developer as a Principal, and Exhibit C shall be so amended automatically upon notice thereof to Developer.
Throughout the term of this Agreement, Franchisor shall have a continuing right to designate as a Principal any person or entity that owns a direct or indirect interest in Developer.
- 7.2.2 This Agreement has been entered into by Franchisor in reliance upon and in consideration of the individual or collective character, reputation, skill, attitude, business ability, and financial capacity of Developer or, if applicable, its Principals who will actively and substantially participate in the development, ownership and operation of the Black Bear Diner restaurants.
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
Based on the 2025 FDD, if the Black Bear Diner developer is a corporation, limited liability company, partnership, or limited liability partnership, the principals with at least a ten percent equity ownership interest are identified in Exhibit C. The developer must maintain the identity and interests of these owners as outlined in the agreement. The franchisor has the right to designate any person or entity with a direct or indirect interest in the developer as a principal, which will automatically amend Exhibit C upon notice to the developer.
Black Bear Diner enters the agreement with the developer based on the character, reputation, skill, attitude, business ability, and financial capacity of the developer or its principals, who will actively participate in the development, ownership, and operation of the restaurants. This indicates that any significant change in ownership or control could be considered a transfer that requires franchisor approval.
While the FDD excerpt does not explicitly list mergers, stock redemptions, consolidations, reorganizations, or recapitalizations as transfers, the franchisor maintains control over changes in ownership and can designate principals with direct or indirect interests. A prospective franchisee should seek clarification from Black Bear Diner regarding whether these specific actions would be considered transfers requiring franchisor approval, as these actions could alter the control or ownership structure of the development entity.