If a Burros Fries franchisee is or becomes a limited liability company, what documentation must be furnished to the franchisor?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
If Franchisee is or becomes a corporation, limited liability company, limited liability partnership, general partnership or other organization or entity, the following requirements shall apply:
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- Franchisee shall confine its activities to the establishment and operation of the Business;
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- Franchisee's Certificate, Articles of Incorporation or Articles of Organization, Certificate of Formation, Shareholders Agreement, Operating Agreement, Partnership Agreement, Business Trust Agreement, and/or Bylaws (or comparable governing documents) shall at all times provide that its activities are confined exclusively to the operation of the Business and that the issuance, redemption, purchase for cancellation and transfer of voting stock, or other ownership interest therein, is restricted by the terms of this Agreement. Franchisee shall furnish us promptly upon request copies of Franchisee's Certificate of Formation, Articles of Incorporation, Bylaws, Operating Agreement, Partnership Agreement, Business Trust Agreement, Shareholders Agreement, and other governing documents, and any other documents we may reasonably request, and any amendments thereto, from time to time;
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- Franchisee shall maintain a current list of all owners of record and beneficial owners of any class of voting stock or other ownership interest in Franchisee and shall furnish such list to us upon request;
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- Franchisee shall maintain stop transfer instructions against the transfer on its record of any equity securities (voting or otherwise) or the certificate of any other entity evidencing ownership except in accordance with the provisions of Section 15 of this Agreement. All securities or other ownership interests issued by Franchisee shall bear the following legend, which shall be printed legibly and conspicuously on each stock certificate or other evidence of ownership interest:
THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE TERMS AND CONDITIONS OF THIS FRANCHISE AGREEMENT WITH BURROS & FRIES FRANCHISE, INC., OF THE SIGNING DATE. REFERENCE IS MADE TO SAID AGREEMENT AND TO THE RESTRICTIVE PROVISIONS OF THE ARTICLES AND BYLAWS OF THIS CORPORATION (IF THE FRANCHISEE IS A LIMITED LIABILITY COMPANY, REFERENCE WILL BE MADE TO THE TRANSFER OF OWNERSHIP RESTRICTIONS SET FORTH IN THIS FRANCHISE AGREEMENT, IN THE LIMITED LIABILITY COMPANY'S OPERATING AGREEMENT, IF THE FRANCHISEE IS A PARTNERSHIP, REFERENCE WILL BE MADE TO THE TRANSFER OF OWNERSHIP RESTRICTIONS SET FORTH IN THIS FRANCHISE AGREEMENT, IN THE PARTNERSHIP AGREEMENT. IF THE FRANCHISEE IS A BUSINESS TRUST, REFERENCE WILL BE MADE TO THE TRANSFER OF OWNERSHIP RESTRICTIONS SET FORTH IN THIS FRANCHISE AGREEMENT, IN THE TRUST AGREEMENT);
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to the 2024 Burros Fries Franchise Disclosure Document, if a franchisee is or becomes a limited liability company, they must furnish certain documents to Burros Fries upon request. These documents include the Franchisee's Certificate of Formation, Articles of Incorporation, Bylaws, Operating Agreement, Partnership Agreement, Business Trust Agreement, Shareholders Agreement, and other governing documents, as well as any amendments to these documents.
This requirement ensures that Burros Fries maintains oversight and control over the franchise operations, even when the franchisee is structured as a limited liability company. By reviewing these documents, Burros Fries can verify that the LLC's activities are confined exclusively to the operation of the Burros Fries business and that the transfer of ownership interests is restricted by the terms of the Franchise Agreement. This helps protect the integrity of the Burros Fries brand and system.
Additionally, the franchisee must maintain a current list of all owners of record and beneficial owners of any class of voting stock or other ownership interest in the Franchisee and provide this list to Burros Fries upon request. The franchisee must also maintain stop transfer instructions against the transfer on its record of any equity securities, ensuring that any transfer of ownership complies with Section 15 of the Franchise Agreement. All securities issued by the Franchisee must bear a specific legend indicating that the transfer of these securities is subject to the terms and conditions of the Franchise Agreement.