Is a guaranty required from the buyer's shareholders or owners for a Counselor Realty franchise transfer?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
our consent and without satisfaction of the conditions stated below. You and your transferee must follow the procedures set forth in Section 9.2, below, and the transferee must sign the then-current form of Counselor Franchise Agreement for the unexpired term, unless the Franchisee is an entity and the transfer is a transfer of an ownership interest in Franchisee or any owner of Franchisee. We will consent to a transfer if the conditions specified in this Agreement in our opinion are satisfied and the transferee in our opinion is qualified to operate the Business in compliance with that Agreement. Notwithstanding anything contained herein to the contrary, Counselor's consent will not be required for, and the right of first refusal set forth in Section 9.6 will not apply to, a transfer described in clause (iv) of the first sentence of this Section 9.1 if (x) such transfer (in a single transaction or series of related transactions) will not result in a change in Control of Franchisee or such direct or indirect owner of Franchisee, (y) you provide Counselor with written notice of such transfer, together with such other information concerning such transfer and transferee as we may require, at least thirty (30) days prior to the consummation of such transfer, and (z) if such transfer is a transfer of an ownership interest in Franchisee, such transferee executes the guaranty attached to this Agreement and delivers 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.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 25–29)
What This Means (2025 FDD)
According to Counselor Realty's 2025 Franchise Disclosure Document, a guaranty from the buyer's shareholders or owners may be required for a franchise transfer. Specifically, Counselor Realty may withhold consent for a transfer if all shareholders or owners of the transferee do not execute a guaranty of the new franchise agreement. This condition is part of the general requirements that Counselor Realty assesses when considering a transfer application.
This requirement ensures that the new ownership is fully committed to upholding the obligations and standards of the Counselor Realty franchise system. By requiring a guaranty, Counselor Realty aims to mitigate the risk of non-compliance or underperformance by the new franchisee. This is a fairly standard practice in franchising, as it provides an additional layer of security for the franchisor.
However, there is an exception. Counselor Realty's consent is not required for certain transfers of ownership interests in the franchisee entity if the transfer does not result in a change of control. However, even in this case, if the transfer is a transfer of an ownership interest in Franchisee, such transferee executes the guaranty attached to this Agreement and delivers such guaranty to Counselor within ten (10) days of such transfer.
Prospective franchisees should carefully review the transfer conditions outlined in Sections 9.1 and 9.2 of the Franchise Agreement to fully understand the requirements and potential implications of transferring their Counselor Realty franchise. They should also discuss these requirements with their legal and financial advisors to ensure they are prepared to meet these obligations if they decide to sell their franchise in the future.