What constitutes a 'Security Interest' in the context of the Bumble Roofing franchise agreement?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) No shares or interest in the capital of such corporation, limited liability company, partnership or other business entity shall be issued nor shall Franchisee directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, sell, assign, transfer, convey, donate, pledge, mortgage or otherwise encumber any such shares or interest or offer or attempt to do so or permit the same to be done without Franchisor's prior written consent;
- (c) The corporation shall maintain stop transfer instructions against the transfer of shares on its records subject to the restrictions of this Section and shall have all outstanding shares endorsed with the following legend printed conspicuously upon the face of each certificate:
"The transfer of this certificate is subject to the terms and conditions of a certain Franchise Agreement with BUMBLE ROOFING FRANCHISOR, LLC Reference is made to said Franchise Agreement and to the restrictive provisions of the articles of this corporation."
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2025 FDD)
According to the 2025 Bumble Roofing Franchise Disclosure Document, a 'Security Interest' arises when a franchisee pledges or encumbers their ownership shares in the business entity without the franchisor's prior written consent. This restriction applies to corporations, limited liability companies, partnerships, or other business entities through which the franchisee operates their Bumble Roofing franchise.
Specifically, the FDD states that franchisees cannot directly or indirectly, voluntarily or involuntarily, sell, assign, transfer, convey, donate, pledge, mortgage, or otherwise encumber any shares or interest in the capital of such business entity without obtaining Bumble Roofing's prior written consent. This provision aims to prevent unauthorized transfers of ownership or control of the franchise, ensuring that Bumble Roofing maintains oversight over who operates its franchises.
To enforce this restriction, Bumble Roofing requires that the business entity maintain stop transfer instructions against the transfer of shares on its records. Additionally, all outstanding shares must be endorsed with a legend that conspicuously states that the transfer of the certificate is subject to the terms and conditions of the Franchise Agreement with Bumble Roofing Franchisor, LLC. This measure serves as a clear warning to potential buyers or transferees that the shares are subject to transfer restrictions.
These measures protect Bumble Roofing's interests by ensuring that franchisees cannot easily transfer ownership or control of the franchise without the franchisor's approval. This allows Bumble Roofing to vet potential new owners and maintain consistent standards across its franchise system. Franchisees need to be aware of these restrictions and obtain written consent from Bumble Roofing before taking any action that could encumber or transfer their ownership interest in the franchise.