For a Buona franchise, what legend must be endorsed on certificates representing ownership interests in the Entity?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
- (g) Franchisee shall maintain transfer restrictions on its records, of any securities with voting rights, subject to the restrictions of this Agreement, and each certificate of Franchisee representing ownership or equity interests in the Entity, shall have conspicuously endorsed upon it the following legend:
The transfer of this [stock/membership interest/ownership interest] is subject to the terms and conditions of a Buona Franchise Agreement with Buona dated . Reference is made to the provisions of said Franchise Agreement and to the governing documents of [name of Franchisee Entity].
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, certificates representing ownership interests in the franchisee's entity must bear a specific legend. This legend indicates that the transfer of the ownership interest (whether stock, membership interest, or other equity) is subject to the terms and conditions outlined in the Buona Franchise Agreement. The legend also references the date of the Franchise Agreement and the governing documents of the franchisee's entity.
This requirement ensures that any potential buyer of an ownership stake in the Buona franchise is fully aware of the restrictions and obligations imposed by the Franchise Agreement. It protects Buona by preventing unauthorized transfers of ownership that could violate the terms of the agreement. This is a standard practice in franchising to maintain control over who operates a franchise and to ensure compliance with brand standards and contractual obligations.
For a prospective Buona franchisee, this means that if they plan to structure their business as a corporation, LLC, or partnership, the ownership certificates issued to shareholders, members, or partners must include the specified legend. This is a critical step to ensure compliance with the Franchise Agreement and to avoid potential disputes or penalties down the road. The franchisee must fill in the bracketed information in the legend with the appropriate terms and the date of the franchise agreement.