When transferring a City Publications franchise to a Controlled Entity, what is the primary purpose for which the Controlled Entity should be formed?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
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- The Controlled Entity shall be newly organized and its activities shall be confined exclusively to the operation of the Franchised Business.
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- Franchisee shall retain total ownership of the outstanding stock or other capital interest in the Controlled Entity and Franchisee shall act as the principal officer or officers and directors thereof.
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- All obligations of Franchisee to Franchisor or any Affiliate shall be fully paid and satisfied prior to Franchisor's consent, provided that Franchisee shall not be required to pay a transfer fee, as required, pursuant to Section 20(B) of this Agreement for any transfer under this Section 20(C).
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- The Controlled Entity shall enter into a written agreement with Franchisor expressly assuming the obligations of this Agreement and all other agreements relating to the operation of the Franchised Business. If the consent of any other contracting party to any such agreement is required, Franchisee shall have obtained such written consent and provided the same to Franchisor prior to consent by Franchisor.
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to the 2025 City Publications Franchise Disclosure Document, if a franchisee wishes to transfer their franchise to a Controlled Entity, that entity must be newly organized and its activities must be confined exclusively to the operation of the Franchised Business. This means the Controlled Entity's sole purpose must be running the City Publications franchise.
Furthermore, the franchisee must retain total ownership of the outstanding stock or other capital interest in the Controlled Entity and act as the principal officer(s) and director(s). This ensures the franchisee maintains control over the business even after the transfer to the Controlled Entity.
Prior to City Publications' consent to the transfer, all obligations of the franchisee to City Publications or any affiliate must be fully paid and satisfied. However, the franchisee is not required to pay a transfer fee, as typically required in franchise agreements, for transfers under this specific section. The Controlled Entity must also enter into a written agreement with City Publications, expressly assuming all obligations of the original franchise agreement and any other agreements related to the operation of the franchise. If any other contracting party's consent is required for these agreements, the franchisee must obtain and provide this consent to City Publications before the transfer can be approved.