Is the issuance of additional securities considered a transfer under the Focalpoint Coaching franchise agreement?
Focalpoint_Coaching Franchise · 2025 FDDAnswer from 2025 FDD Document
In this Agreement, the term "transfer" includes a voluntary, involuntary, direct, or indirect assignment, sale, gift, or other disposition. An assignment, sale, gift, or other disposition includes the following events:
- (a) transfer of ownership of capital stock, a partnership or membership interest, or another form of ownership interest;
- (b) merger or consolidation or issuance of additional securities or other forms of ownership interest;
- (c) any sale of a security convertible to an ownership interest;
- (d) transfer of an interest in Franchisee, this Agreement, the Franchised Business or all or substantially all of its assets, or Franchisee's owners in a divorce, insolvency, or entity dissolution proceeding or otherwise by operation of law;
- (e) if Franchisee, one of Franchisee's owners, or an owner of one of Franchisee's owners dies, a transfer of an interest in Franchisee, this Agreement, the Franchised Business or substantially all of its assets, or Franchisee's owner by will, declaration of or transfer in trust, or under the laws of intestate succession; or
- (f) pledge of this Agreement (to someone other than Franchisor) or of an ownership interest in Franchisee or Franchisee's owners as security, foreclosure upon the Franchised Business, or Franchisee's transfer, surrender, or loss of the Office's possession, control, or Franchised Business' management. Franchisee may grant a security interest (including a purchase money security interest) in the Franchised Business' assets (not including this Agreement) to a lender that finances Franchisee's acquisition, development, and/or operation of the Franchised Business without having to obtain Franchisor's prior written approval as long as Franchisee gives Franchisor ten (10) days' prior written notice.
Source: Item 22 — Contracts (FDD pages 56–57)
What This Means (2025 FDD)
According to Focalpoint Coaching's 2025 Franchise Disclosure Document, the term "transfer" within the franchise agreement encompasses various scenarios, including the issuance of additional securities. This definition is important for prospective franchisees because any action considered a transfer is subject to certain conditions and may require approval from Focalpoint Coaching. Failing to comply with the transfer conditions could result in a breach of the franchise agreement.
Specifically, the franchise agreement states that a transfer includes the "issuance of additional securities or other forms of ownership interest." This means that if a franchisee, operating as a corporation or other entity, issues new stock or other ownership shares, it is legally considered a transfer under the agreement. This is not limited to just stock, but also includes other forms of ownership interest.
This provision is designed to allow Focalpoint Coaching to maintain control over who has an ownership stake in its franchises. By defining the issuance of additional securities as a transfer, Focalpoint Coaching can ensure that any new owners meet their standards and do not pose a risk to the brand. The franchisee must adhere to the conditions for approval of transfer as outlined in the franchise agreement.
For a prospective Focalpoint Coaching franchisee, this means that they need to seek approval from Focalpoint Coaching before issuing any new securities or ownership interests in their franchise business. This could involve providing information about the potential new owners, ensuring they meet Focalpoint Coaching's standards, and potentially paying a transfer fee. It is important to carefully review Section 12 of the franchise agreement, as referenced in the excerpt, to fully understand the conditions and requirements for obtaining approval for a transfer.