What requirement from Section 22.3 applies to an Engel & Volkers franchisee's offer and sale of securities?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee is a business entity and intends to offer and sell securities of any type or nature or other ownership interests in Franchisee, the franchised Business, any Principal and/or any Guarantor, then Franchisee must give Franchisor written notice at least sixty (60) days prior to the date of commencement of any such offering. Any such offering shall be subject to Franchisor's right of first refusal, as set forth above in Section 22.5, and shall comply with any written policies adopted and announced by Franchisor from time to time. The requirements regarding executed non-disclosure agreements from prospective purchasers as stated in Section 22.3 shall apply in such circumstances.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, Section 22.7 addresses the franchisee's offer and sale of securities. However, Section 22.3 also applies in such circumstances, specifically requiring that prospective purchasers of securities execute non-disclosure agreements. This means that before an Engel & Volkers franchisee can discuss or offer securities to potential investors, those investors must sign a non-disclosure agreement acceptable to Engel & Volkers.
This requirement ensures that the franchisee protects Engel & Volkers's proprietary information during discussions with potential investors. The franchisee must also provide copies of these non-disclosure agreements to Engel & Volkers upon request. This allows Engel & Volkers to monitor and enforce the confidentiality of its proprietary information.
In practical terms, this means that an Engel & Volkers franchisee looking to raise capital by selling securities needs to incorporate this step into their process. They will need to have a non-disclosure agreement drafted or approved by Engel & Volkers and ensure it is signed before any confidential information is shared with potential investors. Failure to comply with this requirement could result in a breach of the franchise agreement.
This is a fairly standard practice in franchising, as franchisors want to maintain control over their confidential information and protect their brand. Franchisees should consult with legal counsel to ensure their non-disclosure agreements are compliant and enforceable.