Under what condition does Section 5.7 of the Epcon Communities Franchise Agreement not apply to an offering?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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; provided that Franchisor's consent to such transfer may, in its sole discretion, be conditioned upon the following requirements:
- (a) The transferee entity shall be newly organized and its Articles of Incorporation and Bylaws (or comparable governing documents for entities other than corporations) shall provide that its activities are confined exclusively to operate the business franchised hereunder and activities related thereto;
- (b) Franchisee shall identify to Franchisor all of the stockholders, directors, officers, partners and/or members of the transferee entity;
- (c) Franchisee shall enter into an agreement, in a form satisfactory to Franchisor, unconditionally guaranteeing the full payment and performance of the transferee entity's obligations to Franchisor;
- (d) Each stock (or other ownership interest) certificate of the transferee entity shall have conspicuously endorsed upon its face the following legend:
Source: Item 23 — RECEIPTS (FDD pages 86–280)
What This Means (2025 FDD)
According to the 2025 Epcon Communities Franchise Disclosure Document, Sections 12.1, 12.2, and 12.3 of the franchise agreement do not apply when a franchisee transfers their interest in the Epcon Communities franchise to a corporation, partnership, or limited liability company solely for ownership convenience.
However, this exception is conditional. Epcon Communities's consent to such a transfer is based on specific requirements. The transferee entity must be newly organized, and its governing documents must restrict its activities exclusively to operating the franchised business and related activities. The franchisee must also identify all stockholders, directors, officers, partners, and/or members of the transferee entity to Epcon Communities.
Furthermore, the franchisee must enter into an agreement that guarantees the transferee entity's obligations to Epcon Communities. Each stock or ownership interest certificate of the transferee entity must have a conspicuous legend indicating that the shares are subject to restrictions outlined in the franchise agreement. These conditions ensure that while the franchisee can transfer ownership for convenience, Epcon Communities maintains control and oversight over the franchise operation and its adherence to the franchise agreement terms.