Does Creative Colors have to approve a transfer of the franchise?
Creative_Colors Franchise · 2025 FDDAnswer from 2025 FDD Document
- (7) No new shares of common or preferred voting stock in the transferee corporation or membership certificates in the transferee LLC shall be issued to any person, partnership, member, LLC, trust, foundation, or corporation without obtaining Franchisor's prior written consent and then only upon disclosure of the terms and conditions contained herein being made to the prospective new owners of stock or membership interest; and
- (8) All accrued money obligations of Franchisee to Franchisee's suppliers, Franchisor, its subsidiaries or assignees, shall be satisfied prior to assignment or transfer.
- b) If Franchisee is a corporation or LLC formed solely for the purposes of acting as a CREATIVE COLORS INTERNATIONAL franchisee as licensed under this Agreement, each stock certificate of the corporation or each membership certificate of the LLC shall have conspicuously endorsed upon it a statement that it is held subject to, and that assignment or transfer thereof is subject to, all restrictions imposed upon assignments by this Agreement.
- c) If the transfer, other than such transfer as is authorized under Paragraph XIX.B.2.a. of this Agreement, if consummated alone or together with other related previous, simultaneous, or proposed transfers, would have the effect of transferring control of the franchise licensed herein to someone other than an original signatory of this Agreement:
- (1) The transferee(s) shall be of good moral character and reputation and shall have a good credit rating and competent business qualifications reasonably acceptable to Franchisor. Franchisee shall provide Franchisor with such information as Franchisor may require to make such determination concerning each such proposed transferee(s);
- (2) The transferee(s) or such other individual(s) as shall be the actual manager of the franchise shall have successfully completed and passed the training course then in effect for franchisees, or otherwise demonstrated to Franchisor's satisfaction, sufficient ability to operate the Franchised Business being transferred;
- (3) The transferee(s), including all shareholders, officers, directors, partners, and members of the transferee(s), shall jointly and severally execute any or all of the following, at Franchisor's sole discretion and as Franchisor shall direct:
- aa. The Franchise Agreement and other standard ancillary agreements with Franchisor on the current standard forms being used by Franchisor, except that an additional franchise fee shall not be charged; and/or
Source: Item 23 — RECEIPT (FDD pages 69–217)
What This Means (2025 FDD)
According to Creative Colors' 2025 Franchise Disclosure Document, the transfer of a franchise is subject to approval by Creative Colors. Specifically, if a transfer, alone or with other transfers, would result in a change of control of the franchise to someone other than the original signatory of the agreement, certain conditions must be met.
The potential transferee must have good moral character, a good credit rating, and competent business qualifications that are reasonably acceptable to Creative Colors. The franchisee must provide Creative Colors with any information required to make this determination. Additionally, the transferee or the individual managing the franchise must complete the then-current training course for franchisees or demonstrate sufficient ability to operate the business to Creative Colors' satisfaction.
The transferee, including all shareholders, officers, directors, partners, and members, may be required to execute the Franchise Agreement and other standard ancillary agreements on the current standard forms used by Creative Colors. However, an additional franchise fee will not be charged in this case. Furthermore, no new shares of voting stock in the transferee corporation or membership certificates in the transferee LLC can be issued without Creative Colors' prior written consent. All accrued financial obligations of the franchisee to suppliers, Creative Colors, its subsidiaries, or assignees must be satisfied before the transfer.
If the franchisee is a corporation or LLC formed solely for the purpose of acting as a Creative Colors franchisee, each stock or membership certificate must have a statement that it is subject to the restrictions imposed on assignments by the Franchise Agreement. These stipulations ensure that Creative Colors maintains control over who operates their franchises and that the brand's standards and financial obligations are upheld even when ownership changes.