Does a transfer to a Controlled Entity trigger the Right of First Refusal for a Deka Lash franchise?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
- 14.3 Transfer to a Controlled Entity. A "Controlled Entity" is an entity in which you are the beneficial owner of 100% of each class of voting ownership interest. A transfer to a Controlled Entity shall not trigger the Right of First Refusal, described in Section 14.6 below. At the time of the desired transfer of interest to a Controlled Entity, you must notify us in writing of the name of the Controlled Entity and the name and address of each officer, director, shareholder, member, partner, or similar person and their respective ownership interest. We do not charge a transfer fee for this change.
- 14.4 Transfer within an Entity. A transfer of interest within an entity shall not trigger the Right of First Refusal described in Section 14.6 below if only the percentage ownership, rather than the identity of the owners, is changing. Prior to the time of the desired transfer of interest within an entity, you must notify us in writing of the name and address of each officer, director, shareholder, member, partner or similar person and their respective ownership interest. Each such person of the Controlled Entity shall sign the then current amendment and release forms and/or Franchise Agreement as required by us.
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, a transfer to a Controlled Entity does not trigger the Right of First Refusal. A Controlled Entity is defined as an entity in which the franchisee is the beneficial owner of 100% of each class of voting ownership interest.
To initiate a transfer to a Controlled Entity, the franchisee must provide written notification to Deka Lash. This notification should include the name of the Controlled Entity, as well as the name and address of each officer, director, shareholder, member, partner, or similar person, along with their respective ownership interest. Deka Lash does not charge a transfer fee for this type of change.
Furthermore, the FDD states that a transfer of interest within an entity also does not trigger the Right of First Refusal if only the percentage ownership is changing, rather than the identity of the owners. In this case, the franchisee must still notify Deka Lash in writing of the name and address of each officer, director, shareholder, member, partner, or similar person and their respective ownership interest. Each person of the Controlled Entity must also sign the then-current amendment and release forms and/or Franchise Agreement as required by Deka Lash.