What is the consequence if an individual with ownership interest in a DryJect franchisee business entity transfers their interest without DryJect's consent?
Dryject Franchise · 2025 FDDAnswer from 2025 FDD Document
- (viii) You shall not issue any additional stock, membership, or interests in You and no individual with ownership interest in You shall transfer, assign or pledge any ownership interest in You without Our prior written consent, which shall not be unreasonably withheld, and a legend setting forth such restriction on transfers shall be contained in the business entity's organizational and governing documents and other appropriate documents such as certificates and stocks. In giving Our consent, We shall have the right
Source: Item 8 — BUSINESS RELATIONSHIP (FDD pages 68–229)
What This Means (2025 FDD)
According to Dryject's 2025 Franchise Disclosure Document, if a franchisee is a business entity, no individual with ownership interest in the entity can transfer, assign, or pledge their ownership interest without Dryject's prior written consent. This consent will not be unreasonably withheld. A legend setting forth such restriction on transfers must be included in the business entity's organizational and governing documents, as well as other relevant documents like certificates and stocks.
Dryject requires this level of control over ownership transfers to protect its franchise system. The FDD states that Dryject needs to ensure that any transfer meets their requirements for new franchisees. These requirements include good reputation and character, experience, business acumen, operational ability, and financial strength and stability. Dryject also wants to ensure the new owner is willing and able to devote full time and best efforts to the operation of the franchised business.
Dryject also states that a stop transfer order shall be in effect against the transfer of any securities on Your records except transfers permitted by this Agreement. Any assignment or transfer permitted by this Agreement shall not be effective until We receive a completely executed copy of all transfer documents and consent to such transfer in writing. Under no circumstances will You have a right to transfer under this Agreement before the Franchised Business has commenced operations.
While the FDD excerpt specifies that Dryject's consent is required for ownership transfers and outlines the conditions under which consent may be granted, it does not explicitly state the consequences of an unapproved transfer. A prospective franchisee should seek clarification from Dryject regarding the specific ramifications of transferring ownership without prior consent. This might include penalties, legal action, or even termination of the franchise agreement.