Under the Focalpoint Coaching franchise agreement, is the sale of a security convertible to an ownership interest considered a transfer?
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 sale of a security convertible to an ownership interest is considered a transfer under the franchise agreement. The agreement broadly defines 'transfer' to include various forms of disposition, both direct and indirect. This definition extends to events such as the transfer of stock, partnership interests, or other ownership forms.
Specifically, the inclusion of 'any sale of a security convertible to an ownership interest' within the definition of 'transfer' means that franchisees must adhere to the transfer conditions outlined in the franchise agreement should they wish to undertake such a transaction. These conditions likely involve obtaining franchisor approval, which may be contingent upon factors such as the transferee's qualifications and financial stability.
This provision is important for prospective Focalpoint Coaching franchisees to understand, as it dictates the procedures and potential restrictions associated with transferring ownership interests in their franchise. Failing to comply with these transfer conditions could result in a breach of the franchise agreement, potentially leading to termination or other penalties. Therefore, franchisees should carefully review the transfer provisions and seek legal counsel to ensure full compliance before engaging in any transaction that could be deemed a transfer under the agreement.