What constitutes a 'controlling ownership interest' in an Extreme Art Studio franchise?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
In the case of a proposed transfer of an ownership interest in you or one of your owners, the determination of whether a "controlling ownership interest" is involved must be made as of both immediately before and immediately after the proposed transfer to see if a "controlling ownership interest" will be transferred (because of the number of owners before the proposed transfer) or will be deemed to have been transferred (because of the number of owners after the proposed transfer).
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, a 'controlling ownership interest' is defined by the percentage of voting shares or other voting rights. This percentage is calculated by dividing one hundred percent (100%) of the ownership interests by the number of owners. This definition is crucial when considering the transfer of ownership within an Extreme Art Studio franchise.
For a prospective Extreme Art Studio franchisee, this means that any transfer of ownership must be evaluated both before and after the proposed transfer. The determination checks whether a 'controlling ownership interest' will be transferred based on the number of owners involved. This ensures that the franchisor maintains clarity and control over who ultimately owns and operates the franchise.
This clause is particularly important because it affects the transfer process and the franchisor's approval rights. Extreme Art Studio needs to assess whether the transfer results in a change of control. By defining 'controlling ownership interest' precisely, Extreme Art Studio aims to prevent ambiguity and potential disputes during ownership changes, ensuring compliance with the franchise agreement.