What is the definition of 'Control' in the context of transferring a City Wide franchise?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, "Control" in the context of franchise transfers is specifically defined in Section 13.3 of the franchise agreement. This section outlines scenarios where a transfer of ownership interest doesn't necessarily trigger the standard transfer requirements, provided it doesn't result in a loss of control.
Control is defined as owning or controlling, whether through voting securities or other means, at least 51% of the voting power in the franchisee's company or an affiliated company. Alternatively, control also exists if there's a contractual power to designate a majority of the directors of the franchisee or an affiliated company. This definition is important because transfers that don't result in a change of control, as defined, may be exempt from certain transfer requirements outlined in other sections of the agreement.
For a prospective City Wide franchisee, this means that internal restructuring or ownership changes within their company might be possible without needing to go through the full transfer approval process, as long as the original owners retain the defined level of control. However, it's crucial to carefully review Attachment G, which lists the individuals and entities whose control is relevant for this determination. Any transfer that shifts control away from those listed parties would likely be subject to the standard transfer procedures, including City Wide's approval and potential fees. This clause provides some flexibility for franchisees while ensuring City Wide maintains oversight of who ultimately controls its franchises.