What constitutes a change in membership interests that requires notification to Closet Storage Concepts?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
7. SALE OR TRANSFER
- 7.1 Consent to Transfer. Franchisee's rights under this Agreement are personal, and if Franchisee is an individual, Franchisee shall not change, sell, transfer, assign or encumber his/her/their percentage of ownership interest in this Agreement or the Franchised Business, without the prior written consent of Franchisor. Any unauthorized transfer by Franchisee shall constitute a material breach of the Agreement and shall be voidable by Franchisor. If Franchisee is an entity, Section 7.3 shall govern.
- 7.2 Death or Disability. In the event of the death, disability or incapacity of any individual Franchisee or officer or director or member of an incorporated Franchisee or limited liability company or partner of a partnership Franchisee, should the decedent's or disabled or incapacitated person's executor, heir or legal representative, or the business entity, as the case may be, wish to continue as Franchisee under this Agreement, such person shall apply for Franchisor's consent, execute the then-current franchise agreement, and complete the training program to Franchisor's satisfaction, as applicable, as in any other case of a proposed transfer of Franchisee's interest in this Agreement. Such assignment by operation of law shall not be deemed in violation of this Agreement, provided the heirs or legatees or business entity meet the conditions imposed by this Agreement and are acceptable to Franchisor.
If Franchisee is a business entity, this Agreement shall continue in effect upon the death of the largest equity owner, provided that the active management of the business entity shall remain stable and reasonably satisfactory to Franchisor in its sole discretion.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts's 2025 Franchise Disclosure Document, if the franchisee is an individual, they must obtain prior written consent from Closet Storage Concepts before changing, selling, transferring, assigning, or encumbering their ownership interest in the franchise agreement or the franchised business. Any unauthorized transfer constitutes a material breach and is voidable by Closet Storage Concepts. If the franchisee is a business entity, Section 7.3 of the franchise agreement governs changes in ownership.
In the event of death, disability, or incapacity of an individual franchisee, or an officer, director, or member of an incorporated franchisee or limited liability company, or a partner of a partnership franchisee, their executor, heir, or legal representative must apply for Closet Storage Concepts's consent to continue as a franchisee. They must also execute the then-current franchise agreement and complete the training program. Such assignment by operation of law is not a violation of the agreement, provided the heirs, legatees, or business entity meet the conditions imposed by the agreement and are acceptable to Closet Storage Concepts.
If the franchisee is a business entity, the agreement remains in effect upon the death of the largest equity owner, as long as the active management of the business entity remains stable and reasonably satisfactory to Closet Storage Concepts. This ensures that the franchise continues to operate smoothly and in accordance with Closet Storage Concepts's standards, even in the event of a change in ownership or management.