According to the Degree Wellness transfer agreement, what is the 'Transferred Interest'?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
14.2 Interests in Franchise Owner; Reference to Exhibit 2. You and each Principal Owner represent, warrant, and agree that all "Interests" in Franchise Owner are owned in the amount and manner described in Exhibit 2. No Interests in Franchise Owner will, during the Term of this Agreement, be "public" securities (i.e., securities that require, for their issuance, registration with any state or federal authority). (An "Interest" is defined to mean any shares, units, membership interests, or partnership interests of Franchise Owner and any other equitable or legal right in any of Franchise Owner's stock, revenues, profits, rights, or assets. When referring to Franchise Owner's rights or assets, an "Interest" means this Agreement, Franchise Owner's rights under and interest in this Agreement, any Degree Wellness franchise, and the revenues, profits or assets of any Degree Wellness franchise.) You and each Principal Owner also represent, warrant, and agree that no Principal Owner's Interest has been given as security for any obligation (i.e., no one has a lien on or security interest in a Principal Owner's Interest), and that no change will be made in the ownership of an Interest other than as expressly permitted by this Agreement or
as we may otherwise approve in writing. You and each Principal Owner agree to furnish us with such evidence as we may request from time to time to assure ourselves that the Interests of Franchise Owner and each of your Principal Owners remain as permitted by this Agreement, including a list of all persons or entities owning any Interest, as defined above.
Source: Item 23 — Receipts (FDD pages 66–257)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, an "Interest" is defined as any shares, units, membership interests, or partnership interests of Franchise Owner and any other equitable or legal right in any of Franchise Owner's stock, revenues, profits, rights, or assets. When referring to Franchise Owner's rights or assets, an "Interest" means the Franchise Agreement, Franchise Owner's rights under and interest in this Agreement, any Degree Wellness franchise, and the revenues, profits or assets of any Degree Wellness franchise.
For a prospective franchisee, this definition is important because it clarifies exactly what rights and assets are involved in a transfer. It encompasses not only the tangible aspects of the franchise (like equipment and inventory) but also the intangible rights and interests conferred by the franchise agreement itself. This broad definition ensures that all aspects of the franchise's value are considered during a transfer, whether it's a sale to a new owner or a transfer due to death or disability.
Degree Wellness requires that all Interests in the Franchise Owner are owned in the amount and manner described in Exhibit 2 of the Franchise Agreement. Furthermore, these Interests cannot be "public" securities requiring registration with state or federal authorities. This restriction likely aims to maintain tighter control over ownership and prevent the franchise from becoming subject to public market fluctuations or regulatory burdens associated with publicly traded securities. Franchisees must also obtain Degree Wellness's approval for any changes in ownership of an Interest, ensuring that the franchisor retains oversight over who is involved in the franchise. This is a common practice in franchising to protect the brand and ensure that new owners meet the franchisor's standards.
Additionally, franchisees and principal owners must warrant that no Principal Owner's Interest has been given as security for any obligation, meaning there are no liens or security interests on their ownership stake. This provision protects Degree Wellness by ensuring that the franchise is not encumbered by the personal debts or obligations of the franchisee or principal owners. The franchisee and principal owners must also furnish Degree Wellness with evidence upon request to assure them that the Interests of Franchise Owner and each of your Principal Owners remain as permitted by this Agreement, including a list of all persons or entities owning any Interest.