Does the Floyds 99 Franchise Agreement allow for indirect transfers of ownership interests in the franchisee entity?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchisee acknowledges that the Franchisor's right to approve or disapprove of a proposed sale or transfer, and all other requirements and rights related to such proposed sale or transfer, as provided for above, shall apply (1) if the Franchisee is a partnership or other business association, to the addition or deletion of a partner or members of the association or the transfer of any partnership or membership among existing partners or members; (2) if the Franchisee is a corporation or limited liability company, to any proposed transfer or assignment of 25% or more of the ownership interests of the Franchisee, whether such transfer occurs in a single transaction or several transactions; and (3) if the Franchisee is an individual, to the transfer from such individual or individuals to a corporation or limited liability company controlled by them, in which case the Franchisor's approval will be conditioned upon: (i) the continuing personal guarantee of the individual (or individuals) for the performance of obligations under this Agreement; (ii) the issuance and/or transfer of ownership interests which would affect a change in ownership of 25% or more of the stock or membership units in the company being conditioned on the Franchisor's prior written approval; (iii) a limitation on the company's business activity to that of operating the FLOYD'S 99 Shop and related activities; and (iv) other reasonable conditions.
Source: Item 22 — CONTRACTS (FDD pages 57–58)
What This Means (2025 FDD)
According to the 2025 Floyds 99 Franchise Disclosure Document, the Franchise Agreement addresses the transfer of ownership interests, including indirect transfers. Specifically, if the franchisee is a corporation or limited liability company, the agreement applies to any proposed transfer or assignment of 25% or more of the ownership interests, whether it occurs in a single transaction or several transactions. This indicates that Floyds 99 monitors and regulates changes in ownership, even when those changes are not direct sales of the franchise itself.
Floyds 99 requires that any transfer of ownership interests of 25% or more in a corporate or LLC franchisee is subject to their approval. This allows Floyds 99 to maintain control over who is involved in the ownership of their franchises and ensures that new owners meet their criteria. The Franchise Agreement stipulates that the proposed transferee will be evaluated based on the same criteria used to assess new franchisees.
Furthermore, the Franchise Agreement grants Floyds 99 a right of first refusal if the franchisee wishes to transfer its rights or any interest in the business entity that owns it. This means that before a franchisee can sell to a third party, Floyds 99 has the option to purchase the rights, interest, or assets on the same terms and conditions. However, this right of first refusal does not apply to transfers involving the addition or deletion of partners or members in a partnership or business association, or transfers from an individual to a corporation or LLC controlled by them, under certain conditions.
In summary, the Floyds 99 Franchise Agreement does account for indirect transfers of ownership. Floyds 99 maintains significant control over changes in ownership, requiring approval for transfers of 25% or more in corporate or LLC franchisees and holding a right of first refusal in many transfer scenarios. This ensures that Floyds 99 can protect its brand and maintain standards across its franchise system.