When transferring a City Publications franchise to a Controlled Entity, who must retain total ownership of the Controlled Entity's stock or capital interest?
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 City Publications' 2025 Franchise Disclosure Document, if a franchisee transfers their franchise to a Controlled Entity, the franchisee must retain total ownership of the outstanding stock or other capital interest in that Controlled Entity. Furthermore, the franchisee must act as the principal officer or officers and directors of the Controlled Entity.
This requirement ensures that the franchisee maintains control over the business even after the transfer to the Controlled Entity. This protects City Publications' interests by ensuring that the individual originally vetted and trained remains in charge. It also aligns with standard franchising practices where the franchisor seeks to maintain consistent management and operational control across all franchise locations.
In addition to maintaining ownership and control, the Controlled Entity must be newly organized and exclusively operate the City Publications franchise. All of the franchisee's obligations to City Publications or any affiliate must be fully paid before City Publications consents to the transfer. The Controlled Entity must also enter into a written agreement with City Publications, expressly assuming all obligations of the franchise agreement and other related agreements. This ensures that the Controlled Entity is legally bound to the terms of the original franchise agreement.