What constitutes a material breach of the City Wide Franchise Agreement regarding transfer restrictions?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
Any purported assignment or transfer, by operation of law or otherwise, not having the prior written consent of CITY WIDE will be null and void and will constitute a material breach of this Agreement entitling CITY WIDE, at its sole and absolute right, to immediately terminate this Agreement; provided however, that CITY WIDE will not unreasonably withhold its approval of a Transfer to a proposed transferee who is of good moral character and whose business experience and aptitude, financial resources, and other qualifications meet CITY WIDE's then-current standards, so long as Franchisee is in full compliance with this Agreement at the time of the proposed Transfer.
- 13.3 Transfer by Franchisee Resulting in No Loss of Control.
Notwithstanding Section 13.2, if Franchisee or any Affiliated Company is a corporation, the terms and conditions of this Section 13 will not be deemed to apply to any Transfer of the voting stock of, or other ownership interest in, Franchisee or such Affiliated Company, which would not, alone or together with other related or unrelated, previous, simultaneous or proposed Transfers, result in a loss of Control (as defined below) of Franchisee or an Affiliated Company by the persons and/or entities listed on the Acknowledgment Regarding Ownership attached to this Agreement as Attachment G.
For the purposes of this Section 13.3 and Section 13.6 of this Agreement, "Control" means:
13.3.1 If Franchisee, an Affiliated Company, or an Owner owns (1) possession or control, whether by ownership of voting securities or otherwise, of fifty-one percent (51%) or more of the voting power in Franchisee or an Affiliated Company, or (2) the contractual power to designate a majority of the directors of Franchisee or an Affiliated Company.
13.3.2 Franchisee's eligibility for the Royalty Rebate Program will not be impacted by a Transfer permitted under Section 13.3.
The Gross Sales generated during the calendar year in which a Transfer under Section 13.3 occurs will be calculated as if the Transfer under Section 13.3 did not occur.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, a material breach regarding transfer restrictions occurs when a franchisee attempts to assign or transfer the agreement without obtaining prior written consent from City Wide. This includes any transfer by operation of law or otherwise. If a franchisee violates this provision, City Wide has the right to immediately terminate the agreement.
However, City Wide will not unreasonably withhold approval of a transfer to a proposed transferee who is of good moral character and meets City Wide's standards for business experience, aptitude, financial resources, and other qualifications. The franchisee must also be in full compliance with the Franchise Agreement at the time of the proposed transfer.
An exception exists if the franchisee or an affiliated company is a corporation. The transfer restrictions do not apply to transfers of voting stock or ownership interests that do not result in a loss of control. Control is defined as owning 51% or more of the voting power or having the contractual power to designate a majority of the directors. Transfers permitted under this exception will not impact the franchisee's eligibility for the Royalty Rebate Program, and the gross sales for the year of the transfer will be calculated as if the transfer did not occur.