When does an 'Equity Transfer' of a partnership occur for a Hawthorn Suites By Wyndham franchise?
Hawthorn_Suites_By_Wyndham Franchise · 2025 FDDAnswer from 2025 FDD Document
Equity Transfer means any transaction or series of transactions in which your owners or you sell, assign, transfer, convey, pledge, or suffer or permit the transfer or assignment of, any percentage of your Equity Interests that will result in a change in control of you to persons other than those persons disclosed on Schedule B, as in effect prior to the transaction. Unless there are contractual modifications to your owners' rights, an Equity Transfer of a corporation or limited liability company occurs when either majority voting rights or beneficial ownership of more than 50% of the Equity Interests changes in one transaction or a series of transactions. An Equity Transfer of a partnership occurs when a newly admitted partner will be the managing, sole or controlling general partner, directly or indirectly through a change in control of the Equity Interests of an entity general partner in one transaction or a series of transactions. An Equity Transfer of a trust occurs when either a new trustee with sole investment power is substituted for an existing trustee, or a majority of the beneficiaries convey their beneficial interests to persons other than the beneficiaries existing on the Effective Date in one transaction or a series of transactions. An Equity Transfer does not occur when the Equity Interest ownership among the owners of Equity Interests on the Effective Date changes without the admission of new Equity Interest owners. An Equity Transfer occurs when you merge, consolidate or issue additional Equity Interests in a transaction which would have the effect of diluting the voting rights or beneficial ownership of your owners' combined Equity Interests in the surviving entity to less than a majority in one transaction or a series of transactions.
Source: Item 22 — CONTRACTS (FDD page 92)
What This Means (2025 FDD)
According to Hawthorn Suites By Wyndham's 2025 Franchise Disclosure Document, an Equity Transfer of a partnership occurs when a newly admitted partner will be the managing, sole, or controlling general partner. This can happen directly or indirectly through a change in control of the Equity Interests of an entity general partner in one transaction or a series of transactions.
For a prospective Hawthorn Suites By Wyndham franchisee structured as a partnership, this means that any change that results in a new partner gaining control over the business operations or equity interests would be considered an equity transfer. This includes scenarios where the new partner becomes the managing partner or controls the general partner entity.
It is important for franchisees to understand this definition because 'Transfer' has a specific meaning within the franchise agreement. Specifically, the franchise agreement requires that the franchisee obtain Hawthorn Suites By Wyndham's consent for such transfers, as specified in Section 9 of the franchise agreement. Failing to adhere to these requirements could potentially lead to a breach of the franchise agreement.