What ownership stake must the Desi District franchisee have in the transferee entity when transferring for convenience of ownership?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- 15.3 Transfer for Convenience of Ownership. If Franchisee is an individual, Franchisee may Transfer this Agreement to a corporation or limited liability company formed for the convenience of ownership after at least 15 days' notice to Desi District Franchise Group, if, prior to the Transfer: (1) the transferee provides the information required by Section 2.3; (2) Franchisee provides copies of the entity's charter documents, by-laws (or operating agreement) and similar documents, if requested by Desi District Franchise Group, (3) Franchisee owns all voting securities of the corporation or limited liability company, and (4) Franchisee provides a guaranty in accordance with Section 2.5.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Desi District Franchise Disclosure Document, a franchisee who is an individual may transfer the franchise agreement to a corporation or limited liability company for convenience of ownership. To do so, the franchisee must own all voting securities of the new corporation or limited liability company. This transfer can occur after providing at least 15 days' notice to Desi District Franchise Group.
Prior to the transfer, the transferee must provide the information required by Section 2.3 of the franchise agreement. The franchisee must also provide copies of the entity's charter documents, by-laws (or operating agreement), and similar documents if requested by Desi District Franchise Group. Additionally, the franchisee must provide a guaranty in accordance with Section 2.5 of the franchise agreement.
This provision allows individual Desi District franchisees to incorporate their business for legal and tax purposes while maintaining full control. It is important to note that this type of transfer is specifically for 'convenience of ownership' and requires the franchisee to maintain complete ownership of the transferee entity. This differs from a standard transfer to a third party, which would be subject to different requirements and the franchisor's approval.