What constitutes a 'Controlling Ownership Interest' in a Caption By Hyatt franchise?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
A "Controlling Ownership Interest" in you or one of your owners (if that owner is a legal entity) means, whether directly or indirectly, either: (a) the record or beneficial ownership of, or right to control, 50% or more of the investment capital, equity, rights to receive profits or losses, or other rights to participate in your or the entity's results; or (b) the effective control of the power to direct or cause the direction of your or that entity's management and policies, including a general partnership interest (if the entity is a partnership) and a manager or managing member interest (if the entity is a limited liability company), or the power to appoint or remove any party having these powers. In addition, in the case of (a) or (b), the determination of whether a "Controlling Ownership Interest" exists is made both immediately before and immediately after a proposed transfer.
Source: Item 15 — Obligation to Participate in the Actual Operation of the Franchise Business (FDD pages 71–74)
What This Means (2025 FDD)
According to Caption By Hyatt's 2025 Franchise Disclosure Document, a 'Controlling Ownership Interest' is specifically defined in relation to the franchise agreement and its implications for ownership and guarantees. This definition is crucial for determining who must provide a personal guarantee for the franchise's obligations.
The FDD states that a 'Controlling Ownership Interest' exists if an owner, whether directly or indirectly, holds either (a) 50% or more of the investment capital, equity, rights to profits or losses, or other rights to participate in the entity's results, or (b) the effective control of the power to direct the entity's management and policies. This includes holding a general partnership interest, a managing member interest in a limited liability company, or the power to appoint or remove parties with such powers.
This definition is applied both immediately before and immediately after any proposed transfer of ownership. This ensures that the guarantee requirements are consistently enforced, preventing any loopholes that could arise from ownership changes. Caption By Hyatt requires that owners with a Controlling Ownership Interest provide a personal guarantee, ensuring they are fully liable for the franchise's obligations, both monetary and non-monetary.