What constitutes 'control' in the context of the Extreme Art Studio Franchise Agreement?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
and the Franchised Business or an ownership interest in you), including, without limitation, any person who has a direct or indirect interest in you (or a transferee), this Franchise Agreement or the Franchised Business, and any person who has any other legal or equitable interest, or the power to vest in himself or herself any legal or equitable interest, in their revenue, profits, rights or assets.
- 17.14.7 References to a "controlling ownership interest" in you or one of your owners (if an Entity) mean the percent of the voting shares or other voting rights that results from dividing one hundred percent (100%) of the ownership interests by the number of owners.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, the definition of 'controlling ownership interest' relates to the percentage of voting rights. Specifically, it means "the percent of the voting shares or other voting rights that results from dividing one hundred percent (100%) of the ownership interests by the number of owners."
This definition is important in the context of transferring ownership. The FDD states that when considering a transfer of ownership, the determination of whether a 'controlling ownership interest' is involved must be made both immediately before and immediately after the proposed transfer. This is to ascertain if a controlling interest will be transferred based on the number of owners involved in the transaction.
For a prospective Extreme Art Studio franchisee, this means that any transfer of ownership must be carefully evaluated to determine if it constitutes a transfer of a controlling interest, as defined in the franchise agreement. This determination impacts the procedures and approvals required by Extreme Art Studio for the transfer to proceed. Understanding this definition is crucial for maintaining compliance with the franchise agreement during any ownership changes.