Does Cicis require that a franchisee's governing documents subject ownership interests to restrictions imposed on assignments or transfers by the franchise agreement?

According to Cicis's 2025 Franchise Disclosure Document, if the franchisee is not a natural person, their governing documents must stipulate that ownership interests are subject to all restrictions imposed on assignments or transfers as outlined in the franchise agreement. This requirement ensures that Cicis maintains control over who becomes a franchisee and that any transfer of ownership adheres to the standards and conditions set forth in the franchise agreement.

This provision is designed to protect Cicis's brand and reputation by ensuring that any changes in ownership meet their approval. It allows Cicis to prevent unwanted or unqualified individuals or entities from gaining control of a franchise location. The restrictions on transfer typically include Cicis's right of first refusal, requiring the transferee to meet certain financial and operational criteria, and the execution of Cicis's then-current franchise agreement.

For a prospective Cicis franchisee, this means that if they operate under a business entity, the organizational documents of that entity (e.g., articles of incorporation, operating agreement) must explicitly state that ownership transfers are subject to the franchise agreement's restrictions. This requirement should be addressed when setting up the business entity to avoid future conflicts or compliance issues. Franchisees should carefully review the transfer provisions in the franchise agreement to fully understand these restrictions and ensure their governing documents are compliant.