Does City Wide have the right to terminate the agreement immediately if an unapproved transfer occurs?
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.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, City Wide has the right to terminate the franchise agreement immediately if a franchisee attempts to transfer the franchise without prior written consent. This is considered a material breach of the agreement. However, City Wide states that it will not unreasonably withhold approval of a transfer to a qualified transferee, assuming the franchisee is in full compliance with the agreement at the time of the proposed transfer.
This provision protects City Wide from having its brand associated with unsuitable operators. It ensures that any new franchisee meets their standards for moral character, business experience, financial resources, and overall qualifications. For a prospective franchisee, this means that any desire to sell or transfer the franchise in the future must be done with City Wide's explicit approval, following their established procedures. Failure to do so could result in immediate termination of the franchise agreement.
However, there is an exception to this rule. If the franchisee is a corporation, transfers of voting stock or ownership interest that do not result in a loss of control by the original owners listed in Attachment G of the agreement are not subject to these transfer restrictions. Control is defined as owning 51% or more of the voting power or having the contractual power to designate a majority of the directors. This exception allows for some flexibility in ownership changes within a corporate structure without requiring franchisor approval, as long as the original owners retain control of the business.
It is important for prospective franchisees to understand these transfer conditions thoroughly. They should discuss with City Wide what constitutes an acceptable transferee and the specific steps required to obtain approval for a transfer. Additionally, franchisees should carefully review Attachment G to understand the implications of ownership changes within a corporate structure.