Does Hydrodog require approval for a merger, consolidation, or issuance of additional securities representing an ownership interest?
Hydrodog Franchise · 2025 FDDAnswer from 2025 FDD Document
- 15.2 By You. You understand and acknowledge that the rights and duties created by this Agreement are personal to you (or, if you are a Business Entity, to your owners) and that we have granted the Franchise to you in reliance upon our perceptions of your (or your owners') individual or collective character, skill, aptitude, attitude, business ability and financial capacity. Accordingly, neither this Agreement (or any interest in it) nor any ownership or other interest that would reduce your voting or equity interest to less than 51% in you or your HydroDog Business may be transferred without our prior written approval. Any transfer without such approval constitutes a breach of this Agreement and is void and of no effect. As used in this Agreement, the term "transfer" includes your (or your owners') voluntary,
involuntary, direct or indirect assignment, sale, gift or other disposition of any interest in: (a) this Agreement; (b) you; or (c) your HydroDog Business.
An assignment, sale, gift or other disposition includes the following events:
(a) transfer of ownership of capital stock or a partnership interest;
(b) merger or consolidation or issuance of additional securities or interests representing an ownership interest in you;
(c) any issuance or sale of your stock or any security convertible to your stock;
Source: Item 23 — RECEIPTS (FDD pages 43–166)
What This Means (2025 FDD)
According to Hydrodog's 2025 Franchise Disclosure Document, any merger, consolidation, or issuance of additional securities or interests representing an ownership interest requires prior written approval from Hydrodog. This requirement is part of a broader set of transfer restrictions imposed by Hydrodog to ensure that any changes in ownership or control meet their standards. Hydrodog maintains these controls because the franchise agreement is personal to the franchisee, and Hydrodog relies on their perceptions of the franchisee's character, skills, and financial capacity when granting the franchise.
Specifically, if a franchisee plans to transfer ownership, merge, consolidate, or issue additional securities, they must seek approval from Hydrodog. Hydrodog will assess the proposed transferee's business experience, aptitude, and financial resources. They may also consider how long the Hydrodog Business has been open and whether the transfer is in the best interest of the Hydrodog system.
If the transfer involves the franchise agreement or a controlling interest in the franchisee's business, additional conditions must be met. The transferee must demonstrate sufficient business experience, aptitude, and financial resources to operate the Hydrodog Business. Furthermore, the organizational documents of the franchisee's business must state that any ownership interest transfers are restricted by the terms of the franchise agreement and subject to Hydrodog's approval. Certificates representing ownership interests must also include a legend referring to these restrictions.
Hydrodog may also require the proposed owner to execute an agreement to be bound jointly and severally by, to comply with, and to guarantee the performance of all of the franchisee's obligations under the franchise agreement. This ensures that Hydrodog has recourse against the new owner for any failures to meet the obligations of the franchise agreement. These measures allow Hydrodog to maintain control over who operates their franchises and to protect the integrity of the Hydrodog brand and system.