Is a transfer of stock in a City Wide franchise considered a 'Transfer' requiring consent?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
ranchisee to execute similar covenants, in a form satisfactory to CITY WIDE, with all of Franchisee's personnel who perform managerial or supervisory functions and all personnel who receive training from CITY WIDE.
SECTION 13. Transfer and Assignment of Agreement
- 13.1 Transfer by CITY WIDE. This Agreement and all rights and duties hereunder may be freely assigned or transferred by CITY WIDE and will be binding upon and inure to the benefit of CITY WIDE'S successors and assigns.
- 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.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, a transfer of stock or interest in a City Wide franchise or its affiliated company is generally considered a "Transfer" that requires the franchisor's prior written consent. Specifically, this applies to any person possessing an interest or holding shares of stock of any kind in the franchisee or any affiliated company. This requirement is in place because City Wide grants the franchise based on the franchisee's business skill and financial capacity, and it's important for City Wide to know and approve who is involved in the franchise.
This means that franchisees must obtain City Wide's approval before making any changes to the ownership structure of their business, including selling shares of stock. To ensure compliance, all share or stock certificates of a corporate franchisee and any affiliated company will contain a legend indicating the restrictions on such stock. This legend serves as a notice of the transfer restrictions and allows them to be enforceable under applicable law.
There is an exception to this rule: if the transfer is to or among existing owners, or to their immediate family (spouse, domestic partner, or children), and does not result in a change of control, then the standard transfer requirements and fees do not apply. However, any other transfer of stock or interest will require City Wide's consent, adherence to specific procedures, and potentially the payment of a transfer fee of $25,000, plus any applicable third-party broker fees.
In the event of death or disability of a franchisee or owner, a surviving spouse, heir, or estate may acquire or retain the interest, subject to City Wide's approval. If the survivor does not wish to retain the interest, they have a limited time to transfer it to a City Wide-approved transferee, following the standard transfer procedures. This ensures that City Wide maintains control over who operates its franchises, even in unforeseen circumstances.