What is the definition of a 'Control Transfer' in the Caption By Hyatt franchise agreement?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
"Control Transfer" means any transfer (as defined in this Exhibit A) of (a) this Agreement (or any interest in this Agreement), (b) the Hotel or all or substantially all of its assets, (c) a Controlling Ownership Interest in Franchisee, whether in one transaction or a series of related transactions (regardless of the time period over which these transactions take place), or (d) a Controlling Ownership Interest in any Controlling Owner (if such Owner is a legal entity), whether in one transaction or a series of related transactions (regardless of the time period over which these transactions take place).
"Controlling Owner" means an individual or legal entity holding a direct or indirect Controlling Ownership Interest in Franchisee.
"Controlling Ownership Interest" in a legal entity means, whether directly or indirectly, either (a) the record or beneficial ownership of, or right to control, fifty percent (50%) or more of the investment capital, equity, rights to receive profits or losses, or other rights to participate in the results of the entity, or (b) the effective control of the power to direct or cause the direction of that entity's management and policies, including a general partnership interest (with respect to an entity that is a partnership) and a manager or managing member interest (with respect to an entity that is a limited liability company), or the power to appoint or remove any such party. 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 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to the 2025 Caption By Hyatt Franchise Disclosure Document, a Control Transfer involves the transfer of significant control or ownership related to the franchise agreement, the hotel, or the franchisee itself. Specifically, it includes the transfer of the franchise agreement, the hotel or substantially all of its assets, a Controlling Ownership Interest in the Franchisee, or a Controlling Ownership Interest in any Controlling Owner. These transfers can occur in a single transaction or through a series of related transactions over time.
For a prospective Caption By Hyatt franchisee, understanding what constitutes a Control Transfer is crucial because such transfers require Hyatt's approval and adherence to specific conditions outlined in the franchise agreement. Failure to comply with these terms can result in a breach of the agreement. This definition ensures that Hyatt maintains control over who operates a Caption By Hyatt franchise and protects the brand's integrity.
The definition of 'Controlling Ownership Interest' further clarifies what level of ownership or control triggers the need for franchisor approval. It includes owning or controlling 50% or more of the entity's investment capital, equity, rights to profits/losses, or the power to direct the entity's management and policies. This threshold is assessed both before and after the proposed transfer to determine if a Control Transfer has occurred.
In summary, the Control Transfer stipulations in the Caption By Hyatt franchise agreement are designed to give the franchisor oversight regarding changes in ownership or control of the franchise, ensuring that any new controlling party meets their standards and is capable of upholding the brand's reputation and operational requirements. Franchisees need to be aware of these stipulations to avoid inadvertently breaching the agreement when considering changes in their ownership structure or business operations.