In the Camp Margaritaville franchise agreement, how does the definition of 'Change of Control' address transactions involving multiple persons acting as a group?
Camp_Margaritaville Franchise · 2025 FDDAnswer from 2025 FDD Document
"Change of Control" shall mean any transaction or series of related transactions pursuant to which: (i) any Person, or any 2 or more Persons acting as a group, and all Affiliates of such Person or Persons, who prior to such transaction(s) owned shares representing less than 50% of the voting power at elections for the board of directors of the Franchisee, shall acquire, whether by purchase, exchange, tender offer, merger, consolidation or otherwise, shares of the Franchisee's capital stock or other means of controlling voting such that following any such transactions, or series of transactions, such Person or group and their respective Affiliates beneficially own 50% or more of the voting power at elections for the board or any successor; or (ii) Franchisee shall sell all or substantially all of its assets, or the majority of its assets if such sale includes the assets relating to Franchisee's performance of its obligations under this Agreement;
Source: Item 23 — RECEIPTS (FDD pages 72–406)
What This Means (2025 FDD)
According to Camp Margaritaville's 2025 Franchise Disclosure Document, a 'Change of Control' includes scenarios where multiple individuals act as a group to acquire significant voting power in the franchise. Specifically, the definition addresses situations where two or more persons, acting as a group, along with their affiliates, collectively increase their ownership to 50% or more of the voting power. This can occur through various means such as purchase, exchange, tender offer, merger, consolidation, or other methods of acquiring shares.
This definition is important for prospective Camp Margaritaville franchisees because it clarifies what constitutes a change in ownership or control that would trigger certain obligations or require franchisor approval. If a group of investors or individuals collectively gains a controlling interest in the franchise, it is treated as a 'Change of Control' event, regardless of whether any single individual acquires a majority stake.
The inclusion of groups in the 'Change of Control' definition prevents franchisees from circumventing the franchisor's oversight by distributing ownership among multiple parties who collectively exert control. Camp Margaritaville needs to be informed if a change of control is going to occur. This ensures that the franchisor maintains the right to vet and approve significant changes in ownership, safeguarding the brand's standards and reputation. This also allows Camp Margaritaville to ensure that the new controlling parties have the necessary experience and financial resources to operate the franchise effectively.