What constitutes 'Control' in the context of a Counselor Realty franchise transfer?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
ers such guaranty to Counselor within ten (10) days of such transfer. For purposes of this Article 9, "Control" means, with respect to the applicable person or entity, ownership or control, directly or indirectly, of a majority of the voting ownership of such person or entity or the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person or entity, by contract or otherwise.
- 9.2 Other Conditions to Transfer. You must apply for our consent by submitting written notice of the pending transfer, with a complete application, signed by you and by the proposed transferee, and payment of the transfer fee, at least 60 days before the proposed transfer date. The transfer fee is $2,000 and applies to all transfers (excluding transfers described in, and in accordance with, the second to last sentence of Section 9.1). We may specifically withhold consent if: (i) you do not pay all amounts you owe to Counselor or its affiliates or to your suppliers; (ii) you (or the transferee) do not complete the repair, maintenance or upgrade of the Business' facility, fixtures, equipment, and signage to then-current System standards; or (iii) all shareholders or owners of the transferee do not execute the guaranty of the new Agreement.
- 9.3 Franchisee Death or Disability.
Source: Item 22 — CONTRACTS (FDD page 32)
What This Means (2025 FDD)
According to Counselor Realty's 2025 Franchise Disclosure Document, 'Control' in the context of franchise transfers is specifically defined. For a person or entity, 'Control' means either owning or controlling, directly or indirectly, a majority of the voting ownership. Alternatively, 'Control' can also mean possessing, directly or indirectly, the power to direct or cause the direction of the management or policies of that person or entity, whether through a contract or other means.
This definition is important because any change in 'Control' triggers certain requirements under the franchise agreement, particularly regarding transfer approvals. If a transfer results in a change of 'Control,' Counselor Realty has the right of first refusal to acquire the agreement or assets. Additionally, the transferee must meet Counselor Realty's qualifications and sign the current franchise agreement.
However, the FDD also states that if a transfer of ownership interest does not result in a change of 'Control,' Counselor Realty's consent is not required, and the right of first refusal does not apply, provided that Counselor Realty receives written notice 30 days prior to the transfer, along with relevant information about the transfer and transferee. In such cases, if the transfer involves an ownership interest in the franchisee, the transferee must execute a guaranty agreement within 10 days of the transfer. This distinction allows for some flexibility in ownership changes without requiring franchisor approval, as long as the ultimate control of the franchise remains unchanged.