What specific clause must be included in the Burros Fries franchisee's governing documents regarding business activities?
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 Burros Fries's 2024 Franchise Disclosure Document, if a franchisee is a corporation, limited liability company, limited liability partnership, general partnership, or other organization, their governing documents must include a clause that confines the entity's activities exclusively to the operation of the Burros Fries business. This requirement extends to the Certificate, Articles of Incorporation or Organization, Certificate of Formation, Shareholders Agreement, Operating Agreement, Partnership Agreement, Business Trust Agreement, and/or Bylaws.
This clause ensures that the franchisee's business focus remains solely on the Burros Fries franchise, preventing any diversification into other business ventures that could potentially conflict with or detract from the franchise operations. It also stipulates that any issuance, redemption, purchase for cancellation, and transfer of voting stock or other ownership interest must be restricted by the terms outlined in the Franchise Agreement.
Furthermore, the franchisee is obligated to provide Burros Fries with copies of all governing documents and any amendments upon request. They must also maintain a current list of all record and beneficial owners of any class of voting stock or other ownership interest and furnish this list to Burros Fries when asked. This allows Burros Fries to maintain oversight and control over the ownership and management structure of its franchisees, ensuring compliance with the franchise agreement and protecting the brand's interests.
All securities or other ownership interests 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 with Burros Fries Franchise, Inc. This legend serves as a clear warning to potential investors about the restrictions on transferring ownership, reinforcing the franchisor's control over the franchise's ownership and operations.