For Engel & Volkers franchisees, what are the acceptable forms of ownership for the franchisee entity?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee is a business entity, e.g., corporation, partnership or limited liability company, Franchisee's principal owners must be named in Appendix 5 (hereinafter called the "Principals"). A Principal is an "owner" that owns ten percent (10%) or more of Franchisee. The Principals will each sign the Principal's Guarantee and Assumption of Obligations attached as Appendix 4 to this Agreement. If the Principal is in a community property state or for other reasons determined by Franchisor, the Principal's spouse may also be required to sign the Guarantee form. If any Principals change, Franchisee must notify and provide an updated list of all Principals to Franchisor immediately.
- 23.2 Ownership in Franchisee: Franchisee shall ensure that the named Principals hereby undertake for the duration of this Agreement:
- 23.2.1 to retain, collectively, an ownership interest of not less than fifty-one percent (51%) of Franchisee's voting capital or, in cases where Franchisee is a subsidiary company, not less than the equivalent percentage of the holding company's voting capital;
- 23.2.2 not to make any disposition of the ownership interests in the aforementioned companies without the prior written consent of Franchisor, which consent shall not be unreasonably withheld;
- 23.2.3 not to make any amendments to the organizational documents of Franchisee without first informing Franchisor in writing, which consent shall not be unreasonably withheld;
- 23.2.4 to retain its position of control over the management and operation of Franchisee; and
- 23.2.5 not to enter into competition during the Term with the ENGEL & VÖLKERS System, either directly or indirectly, in an employed or a self-employed capacity, for its own account or for the account of a third party for the duration of this Agreement, provided always that the Principal is entitled to acquire shares in stock exchange-listed companies during the course of normal investment activity up to an amount of not more than twenty-five percent (25%) of the share capital of such companies.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, the franchise can be owned by a business entity such as a corporation, partnership, or limited liability company. If the franchisee is a business entity, the principal owners, defined as those owning 10% or more of the franchisee, must be listed in Appendix 5 and sign the Principal's Guarantee and Assumption of Obligations in Appendix 4.
These principals must collectively maintain at least 51% ownership of the franchisee's voting capital. They cannot make any changes to the ownership interests or organizational documents without prior written consent from Engel & Volkers. The principals must also retain control over the management and operation of the franchise and cannot compete with the Engel & Volkers system during the agreement term.
If the principal is in a community property state, their spouse may also be required to sign the guarantee form. Engel & Volkers requires immediate notification if there are any changes to the principals involved in the franchise. These stipulations ensure that Engel & Volkers maintains a consistent level of control and commitment from the individuals responsible for operating the franchise, regardless of the business entity structure chosen.