What is the impact of a change in control of the Counselor Realty franchisee entity on the transfer requirements?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
our negligence.
9. TRANSFER OF FRANCHISE.
- 9.1 Transfer Standards. You agree not to change or allow a change, directly or indirectly, in the ownership or Control of (i) your interest in this Agreement, (ii) the Office, any Additional Office, any Extension Office or Business, (iii) a majority of the assets of the Office, any Additional Office, any Extension Office or Business, or (iv) if Franchisee is an entity, any ownership interest in, or Control of, Franchisee or any direct or indirect owner of Franchisee (each, a "transfer"), without having first tendered to us the right of first refusal to acquire this Agreement, such assets or such interests in accordance with Section 9.6 and, if we do not exercise such right, without 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. 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;
Source: Item 22 — CONTRACTS (FDD page 32)
What This Means (2025 FDD)
According to Counselor Realty's 2025 Franchise Disclosure Document, a change in control of the franchisee entity is considered a transfer that requires franchisor approval. "Control" is defined as owning or controlling a majority of the voting ownership of the entity, or possessing the power to direct the management or policies of the entity.
A franchisee must first offer Counselor Realty the right of first refusal to acquire the ownership interests. If Counselor Realty waives this right, the franchisee must then seek Counselor Realty's consent for the transfer. The proposed transferee must meet Counselor Realty's qualifications to operate the business and must sign the then-current form of the Counselor Realty Franchise Agreement for the unexpired term. The franchisee must submit a written notice of the pending transfer, a complete application signed by both parties, and pay a $2,000 transfer fee at least 60 days before the proposed transfer date.
However, Counselor Realty's consent and the right of first refusal are not required if the transfer does not result in a change of control, the franchisee provides written notice to Counselor Realty at least 30 days prior to the transfer, and if the transfer involves an ownership interest in the franchisee, the transferee executes the guaranty attached to the Franchise Agreement and delivers it to Counselor Realty within 10 days of the transfer. This exception provides some flexibility for ownership changes that do not alter who ultimately controls the Counselor Realty franchise.
In summary, a change in control of a Counselor Realty franchisee entity triggers transfer requirements, including right of first refusal, franchisor consent, transferee qualifications, and fees, unless specific conditions are met that ensure the original control is maintained and Counselor Realty is properly notified.