Does the definition of 'transfer' for a Creative World School franchise include indirect assignments?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
XV.TRANSFER.
- 15.01 By Us. This Agreement is fully transferable by us, and inures to the benefit of any transferee or other legal successor to our interests, as long as such transferee or successor agrees to be bound by, and assumes all of our continuing obligations under, this Agreement.
- 15.02 By You. You understand and acknowledge that the rights and duties created by this Agreement are personal to you (or, if you are a Business Entity, to your owners) and that we have granted the Franchise to you in reliance upon our perceptions of your (or your owners') individual or collective character, skill, aptitude, attitude, business ability and financial capacity. Accordingly, neither this Agreement (or any interest in it) nor any ownership or other interest that would reduce your voting or equity interest to less than 51% in you or the School may be transferred without our prior written approval. Any transfer without such approval constitutes a breach of this Agreement and is void and of no effect. As used in this Agreement, the term "transfer" includes your (or your owners') voluntary, involuntary, direct or indirect assignment, sale, gift or other disposition of any interest in: (a) this Agreement; (b) you; or (c) the School.
An assignment, sale, gift or other disposition includes the following events:
(i) transfer of ownership of capital stock or a partnership interest;
(ii) merger or consolidation or issuance of additional securities or interests representing an ownership interest in you;
(iii) any issuance or sale of your stock or any security convertible to your stock;
(iv) transfer of an interest in you, this Agreement or the School in a divorce, insolvency or corporate or partnership dissolution proceeding or otherwise by operation of law;
(v) transfer of an interest in you, this Agreement or the School, in the event of your death or the death of one of your owners, by will, declaration of or transfer in trust or under the laws of intestate succession; or
(vi) pledge of this Agreement (to someone other than us) or of an ownership interest in you as security, foreclosure upon the School or your transfer, surrender or loss of possession, control or management of the School.
Source: Item 23 — RECEIPTS (FDD pages 80–247)
What This Means (2025 FDD)
According to the 2025 Creative World School Franchise Disclosure Document, the term 'transfer' does include indirect assignments. Creative World School requires that franchisees obtain prior written approval from them before transferring the franchise agreement or any ownership interest in the franchise.
The definition of "transfer" is broad, encompassing not only direct assignments but also indirect ones. Specifically, the term includes any voluntary, involuntary, direct, or indirect assignment, sale, gift, or other disposition of any interest in the Franchise Agreement, the franchisee entity, or the school itself. This means that any action that results in a change of ownership or control, even if it's not a straightforward sale, is considered a transfer under the agreement.
The franchise agreement lists several events that constitute a transfer, including the transfer of ownership of capital stock or a partnership interest, merger or consolidation, issuance of additional securities, transfer of an interest in divorce or insolvency proceedings, transfer of interest upon death, and the pledge of the agreement or ownership interest as security. These examples illustrate the extent to which Creative World School aims to control changes in ownership and management of its franchises. This is a common practice in franchising, as the franchisor wants to ensure that any new owners meet their standards and are capable of maintaining the brand's reputation and operational consistency.
For a prospective Creative World School franchisee, this means that any change in ownership structure, even seemingly minor ones, could trigger the transfer restrictions in the franchise agreement. It is important to seek approval from Creative World School for any such changes to avoid breaching the agreement. This requirement is in place to protect the Creative World School brand and ensure that all franchisees meet the franchisor's standards.