If the Principals of an Engel & Volkers franchise change, what action must the franchisee take?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
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
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, if there are any changes to the Principals of a franchise, the franchisee must immediately notify Engel & Volkers and provide them with an updated list of all Principals. A Principal is defined as an "owner" that owns ten percent (10%) or more of the Engel & Volkers franchise.
This requirement ensures that Engel & Volkers is always aware of who the key stakeholders are in each of its franchises. The Principal's Guarantee and Assumption of Obligations, attached as Appendix 4 to the Franchise Agreement, must be signed by each Principal. In community property states, or for other reasons determined by Engel & Volkers, the Principal's spouse may also be required to sign the Guarantee form.
Furthermore, the named Principals must collectively retain an ownership interest of at least 51% of the franchisee's voting capital throughout the term of the agreement. They also cannot make any dispositions of ownership interests or amendments to the organizational documents of the franchisee without prior written consent from Engel & Volkers, which will not be unreasonably withheld. These stipulations ensure the stability and continuity of the franchise's management and ownership structure, aligning with Engel & Volkers' standards and operational requirements.