Is the Extreme Art Studio Owners Agreement affected by the transfer of ownership in the franchisee?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
Owners acknowledge and agree that we have granted the Franchise Agreement to Franchisee in reliance on Owners' business experience, skill, financial resources and personal character.
Accordingly, Owners agree: (a) not to sell, encumber, assign, transfer, convey, pledge, merge or give away any direct or indirect interest in this Franchisee, unless Owners first comply with the sections in the Franchise Agreement regarding transfers and assignment, and (b) that any attempt to do so will be a breach of this Owners Agreement and the Franchise Agreement.
We may, from time to time, without notice to Owners, assign or transfer any or all of Owners' rights, duties and obligations or any interest therein in this Owners Agreement and, notwithstanding any assignment(s) or transfer(s), the rights, duties and obligations shall be and remain for the purpose of this Owners Agreement.
Each and every immediate and successive assignee or transferee of any of the rights, duties or obligations of any interest therein shall, to the extent of such party's interest in the rights duties and/or obligations, be entitled to the benefits of this Owners Agreement to the same extent as if such assignee or transferee were us.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, the Owners Agreement is affected by the transfer of ownership in the franchisee. Specifically, owners are prohibited from transferring any direct or indirect interest in the franchisee unless they comply with the franchise agreement's sections regarding transfers and assignments. Any attempt to transfer ownership without adhering to these sections constitutes a breach of both the Owners Agreement and the Franchise Agreement.
Extreme Art Studio retains the right to assign or transfer any of its rights, duties, and obligations under the Owners Agreement without notifying the owners. This means that the franchisor can transfer its responsibilities and benefits to another party, and the owners must continue to adhere to the agreement. Each successive assignee or transferee of these rights and duties is entitled to the same benefits as Extreme Art Studio, ensuring the continuity and enforceability of the agreement.
Furthermore, the document specifies that if an owner ceases to own at least 51% ownership interest, a revised Attachment C must be delivered to accurately identify the Operating Owner for review and approval. This ensures that Extreme Art Studio is always aware of who the controlling party is and that the Operating Owner is authorized to make decisions on behalf of the franchisee. The franchisor is entitled to rely solely on the decisions of the Operating Owner without needing to consult with any other party named in the Franchise Agreement, and the franchisor will not be held liable for actions based on the Operating Owner's decisions.