What must the governing documents of a Cicis franchisee provide regarding ownership interests and transfer restrictions?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
(2) your governing documents will at all times provide that your activities are confined exclusively to operating your Restaurant, unless otherwise consented to by us in writing;
(7) your governing documents must provide that ownership interests in you are subject to all restrictions imposed upon assignments or transfers by this Agreement;
(8) any agreements among your Owners must require such Owners to consent to the transfer of ownership interests in you to us or our designee upon the exercise of any rights of first refusal or purchase options we have under this Agreement;
Source: Item 22 — CONTRACTS (FDD pages 64–65)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, if the franchisee is not a natural person, the governing documents must adhere to several stipulations regarding ownership interests and transfer restrictions. The documents must state that the franchisee's activities are primarily limited to operating the Cicis restaurant, unless Cicis provides written consent otherwise. Furthermore, the governing documents must ensure that ownership interests are subject to all transfer restrictions outlined in the franchise agreement.
Additionally, any agreements among the franchisee's owners must mandate that they consent to the transfer of their ownership interests to Cicis or its designee. This consent is specifically required if Cicis exercises any rights of first refusal or purchase options as stipulated in the franchise agreement.
These provisions ensure that Cicis maintains control over the franchise and can manage the transfer of ownership effectively. This is a common practice in franchising, allowing the franchisor to maintain brand consistency and quality control by having a say in who operates a franchise location. Prospective franchisees should carefully review these requirements and understand the implications for their ownership structure and potential exit strategies.