Does the definition of 'transfer' for a Creative World School franchise include involuntary assignments?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
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;
Source: Item 23 — RECEIPTS (FDD pages 80–247)
What This Means (2025 FDD)
According to the 2025 Creative World School FDD, the term "transfer" is broadly defined and does include involuntary assignments. Creative World School requires prior written approval for any transfer of the franchise agreement or any ownership interest that would reduce the franchisee's voting or equity interest to less than 51%.
The definition of "transfer" includes both voluntary and involuntary assignments, sales, gifts, or other dispositions of interest in the franchise agreement, the franchisee entity, or the school itself. This encompasses events such as the transfer of ownership of capital stock or partnership interest, mergers or consolidations, issuance of additional securities, and transfers occurring due to divorce, insolvency, or dissolution proceedings.
Furthermore, the definition extends to transfers resulting from death, including those by will, declaration of trust, or intestate succession. It also includes the pledge of the franchise agreement or ownership interest as security, foreclosure upon the school, or the franchisee's loss of possession, control, or management of the school. This comprehensive definition means that a Creative World School franchisee needs to seek approval from the franchisor in a wide array of circumstances where the ownership or control of the franchise changes, even if those changes are not initiated voluntarily.
This requirement protects Creative World School by ensuring that any new owner or controlling party meets their standards for character, skill, business ability, and financial capacity. It also allows Creative World School to maintain consistency and quality across all franchise locations. A prospective franchisee should carefully consider these restrictions on transferability, as they could impact the franchisee's ability to exit the business or deal with unforeseen circumstances.