Does the Degree Wellness franchise agreement consider the issuance of additional securities as a transfer?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
- b. As used in this Agreement the term "Transfer" means any voluntary, involuntary, direct or indirect assignment, sale, gift, exchange, grant of a security interest, or occurrence of any other event which would or might change the ownership of any Interest, and includes, without limitation: (1) the Transfer of ownership of stock, units, membership interests, partnership interest or other ownership interest; (2) merger or consolidation, or issuance of additional securities representing an ownership interest in Franchise Owner; (3) sale or issuance of stock, units, membership interests, partnership interest or other ownership interest; (4) Transfer of an Interest in a divorce proceeding or otherwise by operation of law; (5) Transfer or all, or substantially all, of the operating assets of the Franchised Business; or (6) Transfer of an Interest by will, declaration of or transfer in trust, or under the laws of intestate succession.
- c. We will not unreasonably withhold consent to a Transfer of an Interest by a Principal Owner to a member of his or her immediate family or to one or more of your key employees, so long as all Principal Owners together retain a "controlling Interest" (i.e., the minimum ownership percentage listed in Exhibit 2), although we reserve the right to impose reasonable conditions on the Transfer as a requirement for our consent.
Source: Item 23 — Receipts (FDD pages 66–257)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, the franchise agreement defines 'transfer' broadly, and it does include the issuance of additional securities representing an ownership interest in the Franchise Owner. This is explicitly stated within the definition of what constitutes a 'Transfer.'
This means that if a Degree Wellness franchisee wants to issue additional securities, such as stock or partnership interests, it would be considered a transfer of ownership interest. As such, the franchisee would need to obtain advance written approval from Degree Wellness. Failure to do so would constitute a breach of the franchise agreement, potentially leading to termination.
This requirement allows Degree Wellness to maintain control over who has an ownership stake in its franchises. It ensures that any new owners meet the franchisor's standards and have the necessary business experience, aptitude, and financial resources to operate the franchise successfully. It is a fairly standard clause in franchise agreements to protect the integrity of the brand and the franchise system.
However, Degree Wellness will not unreasonably withhold consent to a transfer of an interest by a Principal Owner to a member of his or her immediate family or to one or more of your key employees, so long as all Principal Owners together retain a 'controlling Interest' (i.e., the minimum ownership percentage listed in Exhibit 2), although Degree Wellness reserves the right to impose reasonable conditions on the Transfer as a requirement for their consent.