What are the requirements for the organizational and governing documents of a Caring Transitions franchisee that is a limited liability business entity?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
advisable in additional to the coverages and limits required by Franchisor.
7.10 Limited Liability Business Entity.
- (a) If Franchisee is a limited liability business entity (such as a corporation or limited liability company) when it signs this agreement, it must satisfy the following requirements at the time it signs this agreement:
- (1) Franchisee must be a newly organized business entity that has never operated or engaged in any business.
- (2) Franchisee's organizational and governing documents must (i) provide that its activities are confined exclusively to operating one or more Caring Transitions Franchises, (ii) prescribe a maximum of ten Principals, and (iii) prohibit the issuance or transfer of its ownership interests other than in compliance with the terms and conditions of this agreement.
- (3) Franchisee shall provide Franchisor with a list of principal owners, certified by the Designated Individual, containing the full legal name, home address, home telephone number, and ownership percentage of each principal of Franchisee.
- (4) Each principal of Franchisee must execute a separate agreement, in a form prescribed by Franchisor, unconditionally guaranteeing the full payment of Franchisee's obligations under this agreement and agreeing to be jointly and severally bound by all the provisions of this agreement, including the Covenants After Termination.
- (5) Each ownership certificate of Franchisee must bear a legend stating that the issuance and transfer of any ownership interest in Franchisee are subject to the terms and conditions of this agreement. If Franchisee is a limited liability company without certificates evidencing ownership, Franchisee shall provide Franchisor with acceptable evidence that its partnership or operating agreement or other organizational documents contain provisions acceptable to Franchisor prohibiting the transfer of any ownership interest in Franchisee other than in compliance with the terms and conditions of this agreement.
- (6) Franchisee shall provide Franchisor with true and complete copies of its organizational and governing documents, including the resolutions of its Principals or governing body authorizing the execution of this agreement.
- (7) The name of the Limited Liability Entity may not contain any of the words CARING TRANSITIONS, CARING, TRANSITIONS, or CT in any order, any variation thereof, or any of the other Marks.
- (b) If Franchisee is not a limited liability business entity when it signs this agreement, then within 90 days after signing this agreement, Franchisee shall transfer all of its interest in the Franchised Business and all of its rights and obligations under this agreement to a limited liability business entity, comply with all of the requirements in subparagraph 7.10(a), and comply with the following additional requirements:
- (1) The individual(s) who executed this agreement as Franchisee shall beneficially own a controlling interest in the limited liability business entity and shall not diminish his/her/their ownership Interest therein, except as may be required by law.
- (2) One of the individuals who executed this agreement as Franchisee shall act as the principal executive (or manager) and operating officer of the limited liability business entity.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 41–49)
What This Means (2025 FDD)
According to Caring Transitions' 2025 Franchise Disclosure Document, if a franchisee is a limited liability business entity when signing the agreement, the organizational and governing documents must meet specific requirements. These requirements include confining the entity's activities exclusively to operating one or more Caring Transitions franchises. The documents must also prescribe a maximum of ten principals and prohibit the issuance or transfer of ownership interests, except in compliance with the franchise agreement terms.
Caring Transitions requires the franchisee to provide a list of principal owners, certified by a designated individual, including their full legal name, home address, home telephone number, and ownership percentage. Each principal must also sign a separate agreement guaranteeing the franchisee's obligations and agreeing to be bound by the franchise agreement. Additionally, each ownership certificate must state that any ownership interest issuance or transfer is subject to the agreement's terms. If the entity is a limited liability company without ownership certificates, the franchisee must provide evidence that its organizational documents contain provisions prohibiting ownership interest transfers unless compliant with the agreement.
The franchisee must provide Caring Transitions with true and complete copies of its organizational and governing documents, including resolutions authorizing the agreement's execution. The name of the limited liability entity cannot include the words "CARING TRANSITIONS", "CARING", "TRANSITIONS", or "CT", or any variation thereof, or any of the other Caring Transitions marks. Furthermore, franchisees cannot modify or restate any provision of their organizational or governing documents without Caring Transitions' prior written approval. Franchisees must also provide updated principal lists upon request or after any change in information, and new principals must execute an agreement guaranteeing the franchisee's obligations.
These stipulations ensure that Caring Transitions maintains control over its brand and franchise operations. By restricting the business activities of the franchisee's entity solely to Caring Transitions franchises, limiting the number of principals, and controlling the transfer of ownership, Caring Transitions aims to protect its business interests and ensure uniformity across all franchise locations. The requirements for principals to guarantee the franchisee's obligations and for franchisees to provide organizational documents and updates further reinforce this control and provide Caring Transitions with necessary information and legal recourse.