Does City Wide consider the rights and duties in the Franchise Agreement personal to the Franchisee?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
- 13.2 Transfer by Franchisee. Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that CITY WIDE has granted the Franchise in reliance on Franchisee's business skill and financial capacity. It is important to CITY WIDE that Franchisee at all times be known to CITY WIDE and meet CITY WIDE's then-current standards and requirements. Accordingly, except pursuant to the specific terms set forth in this Agreement, neither Franchisee, nor any corporation or other entity, domestic or foreign, which has the voting power and control to elect directly or indirectly through another corporation or entity or series of other corporations or entities a majority of the board of directors of Franchisee ("Affiliated Company"), nor any person possessing an interest or holding shares of stock of any kind or nature in Franchisee or any Affiliated Company ("Owner") will be permitted, without the prior written consent of CITY WIDE, to give away, sell, assign, pledge, lease, sublease, devise, or otherwise transfer, either directly or by operation of law or in any other manner, all or any portion of this Agreement; any of Franchisee's rights or obligations under this Agreement, the Franchised Business; or any shares of stock, partnership interest, or interest of any kind or nature in Franchisee or any Affiliated Company (any such transaction being referred to hereinafter as a "Transfer"). In order to secure compliance by Franchisee with the transfer restrictions contained in this Section, all share or stock certificates of any corporate Franchisee and any Affiliated Company will at all times contain a legend sufficient under applicable law to constitute notice of the restrictions on such stock contained in this
Agreement and to allow such restrictions to be enforceable. Such legend will appear in substantially the following form:
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, City Wide considers the rights and duties outlined in the Franchise Agreement as personal to the franchisee. Specifically, City Wide grants the franchise based on their assessment of the franchisee's business skills and financial capabilities.
This means that franchisees cannot freely transfer their rights or obligations under the agreement without City Wide's prior written consent. This restriction extends not only to the franchise agreement itself but also to the franchised business and any ownership interests in the franchisee's company. City Wide needs to know who is operating a franchise and ensure they meet the brand's standards.
To enforce these transfer restrictions, City Wide requires that all stock certificates of a corporate franchisee contain a legend indicating the restrictions on the stock. This measure ensures that potential buyers are aware of the transfer limitations, maintaining City Wide's control over who becomes a franchisee. This is a fairly standard practice in franchising, as franchisors want to ensure that any new owners meet their qualifications and will uphold the brand's standards.