Does Epcon Communities require consent for the transfer of ownership interest to a third party?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
part of Franchisee's interest in this Epcon Communities franchise shall, directly or indirectly, sell, assign, transfer, pledge or encumber, by operation of law or otherwise, this Agreement or the franchise or licensed rights granted hereunder or any ownership interest in Franchisee or any ownership interest in any entity owning an interest in Franchisee' without the prior written consent of Franchisor. Such transfer, sale, assignment, pledge or encumbrance not having the written consent of Franchisor shall be null and void and shall constitute a material breach of this Agreement, for which Franchisor may then terminate this Agreement. Franchisor's consent shall not be required for any Unit sold to third parties in the ordinary course of Franchisee's business. Franchisor shall not unreasonably withhold its consent to a transfer of any interest in Franchisee or in this Epcon Communities franchise, provided, however, that prior to the time of transfer, Franchisor may, in its sole discretion, require that:
- (a) All of Franchisee's accrued monetary obligations to Franchisor and all other outstanding obligations related to the business franchised hereunder shall have been satisfied, or will be satisfied through the transfer;
- (b) The transferor's right to receive compensation, pursuant to any agreement or agreements for the purchase of any interest in Franchisee or in the business franchised hereunder, shall be subordinate and secondary to Franchisor's rights to receive any outstanding monetary obligation or other outstanding obligations due from transferor or Franchisee pursuant to this Agreement, and whether arising before or after the transfer;
- (c) Franchisee shall have executed a general release in a form satisfactory to Franchisor, effective as of the date of transfer, of any and all claims against Franchisor and its officers, directors, shareholders, and employees in their corporate and individual capacities, including, without limitation, claims arising under federal, state and local laws, rules and ordinances.
- (d) The transferee franchisee shall enter into a written assumption, in a form satisfactory to Franchisor, assuming and agreeing to discharge all of Franchisee's obligations under this Agreement prior to and after the date of the assumption;
- (e) The transferee franchisee shall demonstrate to Franchisor's satisfaction that he or she, if an individual, its general partners, if it is a partnership, its members, if it is a limited liability company, and its officers, directors and principal shareholders, if it is a corporation, meet(s) educational and managerial standards; possess(es) good moral character, reputation, and credit rating; has the aptitude and ability to conduct the business franchised hereunder (as may be evidenced by prior related business experience or otherwise); and has adequate financial resources and capital to operate the business franchised hereunder;
- (f) The transferee franchisee shall execute the then-current standard form of Epcon Communities Franchise Agreement and other ancillary agreements as Franchisor may require for the business franchised hereunder for a term ending as provided in Section 3.1 of this Agreement; and
- (g) At transferee franchisee's expense, and upon such other terms and conditions as Franchisor may reasonably require, the transferee franchisee shall complete each of the initial training sessions then in effect for new franchisees.
- 12.2 If Franchisee is a corporation, partnership, limited liability company, or similar entity, the terms of Section 12.1 shall apply to any sale, resale, pledge, assignment, transfer or encumbrance of any voting stock of, or other ownership interest in, Franchisee.
- 12.3 In connection with any transfer for which Franchisor grants its consent as described in Section 12.1 hereof, Franchisee shall pay to Franchisor a transfer fee to cover Franchisor's actual costs, and due diligence, administrative, legal and other expenses respecting the transfer.
- 12.4 In the event that Franchisee proposes to transfer all of its interest in the Epcon Communities franchise granted pursuant hereto to a corporation, partnership, or limited liability company solely for the convenience of ownership, the provisions of Sections 12.1, 12.2, and 12.3 hereof shall not apply;
Source: Item 5 — INITIAL FEES (FDD pages 15–16)
What This Means (2025 FDD)
According to Epcon Communities' 2025 Franchise Disclosure Document, the transfer, sale, assignment, pledge, or encumbrance of any interest in the franchise requires the written consent of Epcon Communities. Without this consent, any such action is considered null and void, constituting a material breach of the agreement, which may lead to termination of the agreement. However, consent is not required for the sale of units to third parties in the ordinary course of the franchisee's business.
Epcon Communities will not unreasonably withhold consent for a transfer of interest, but they may require certain conditions to be met before the transfer. These conditions include ensuring that all accrued monetary obligations and other outstanding obligations related to the franchise are satisfied, either before or through the transfer. Additionally, the transferor's right to receive compensation from the purchase of any interest in the franchise must be subordinate to Epcon Communities' rights to receive any outstanding monetary obligations.
Furthermore, Epcon Communities may require the franchisee to execute a general release of any claims against Epcon Communities and its affiliates. The transferee franchisee must also enter into a written agreement assuming all of the franchisee's obligations under the franchise agreement, both before and after the date of assumption. The transferee franchisee must execute the then-current standard form of the Epcon Communities Franchise Agreement and other ancillary agreements for a term ending as provided in Section 3.1 of the agreement and complete each of the initial training sessions for new franchisees at their own expense.
If the franchisee is a corporation, partnership, limited liability company, or similar entity, these terms also apply to any sale, resale, pledge, assignment, transfer, or encumbrance of any voting stock or other ownership interest in the franchisee. In connection with any approved transfer, the franchisee must pay Epcon Communities a transfer fee to cover their actual costs, due diligence, administrative, legal, and other expenses related to the transfer. However, these provisions do not apply if the transfer is solely for the convenience of ownership to a corporation, partnership, or limited liability company, provided that Epcon Communities may still condition its consent on certain requirements, such as confining the transferee entity's activities to operating the franchised business, identifying all owners of the transferee entity, and obtaining a guarantee from the franchisee for the transferee entity's obligations.