In the Maker's representations and warranties section related to Jersey Mikes, what happens if the ownership percentage of the Maker's membership interests or outstanding stock changes while the Note remains outstanding?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
| a. | Maker's | Representations | and Warrant | ies. | Maker | represents | and | warrants | that |
|---|---|---|---|---|---|---|---|---|---|
| [] holds [] percent ([]%) of the [membership | |||||||||
| interests/outstanding stock] of the Maker and [] holds [] | |||||||||
| percent ([]%) of the [membership interests/outstanding stock] of the Maker and | |||||||||
| covenants that such ownership shall not change while this Note remains outstanding unless | |||||||||
| the Holder consents. |
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
According to Jersey Mikes' 2025 Franchise Disclosure Document, the Maker represents and warrants their current ownership percentage in the company. Specifically, the Maker covenants that this ownership percentage will not change while the Note remains outstanding unless the Holder (Jersey Mike's Franchise Systems, LLC) provides consent. This means that if the ownership structure of the Maker's business changes without Jersey Mike's approval while there is still an outstanding balance on the promissory note, it would be a breach of contract.
This provision protects Jersey Mike's interest in ensuring the stability and commitment of the Maker's ownership during the repayment period. A change in ownership could potentially disrupt the Maker's operations or financial stability, which could impact their ability to repay the note. By requiring consent, Jersey Mike's retains control over significant changes that could affect their investment.
For a prospective Jersey Mikes franchisee, this highlights the importance of understanding all loan agreements and the restrictions they impose. It is crucial to maintain open communication with Jersey Mike's regarding any potential changes in ownership structure and to obtain their consent before proceeding with such changes to avoid breaching the loan agreement.