What is the condition regarding the principal owner's management of the business if an individual Kitchen Solvers franchisee assigns the franchise to a corporation?
Kitchen_Solvers Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding the conditions stated in subparagraph 14.C.1 above, if you are an individual franchisee, you may assign the franchise to a corporation or other similar entity in which you own all of the issued and outstanding capital stock provided that:
a. the principal owner or a manager approved by us actively manages the Business and continues to devote the individual's best efforts and full and exclusive time to the day to day operation and development of the Business;
b. the corporation or other similar entity is newly organized and its activities are confined exclusively to acting as the franchisee under this Agreement;
c. the corporation or other similar entity executes a document in a form approved by us in which it agrees to become a party to and be bound by all the provisions of this Agreement;
d. the principal owner remains personally liable in all respects under this Agreement and executes on a form approved by us a personal guarantee and agreement not to sell, assign, pledge, mortgage or otherwise transfer or encumber the stock; and
e. all stock certificates representing shares in the corporation bear a legend that they are subject to the terms of this Agreement.
Source: Item 22 — Contracts (FDD page 49)
What This Means (2025 FDD)
According to Kitchen Solvers' 2025 Franchise Disclosure Document, if an individual franchisee assigns their franchise to a corporation or similar entity where they own all the capital stock, the principal owner or a manager approved by Kitchen Solvers must actively manage the business. This individual must dedicate their best efforts and full, exclusive time to the daily operation and development of the Kitchen Solvers business.
This condition ensures that the Kitchen Solvers franchise maintains consistent operational standards and benefits from dedicated management even when the franchise ownership structure changes. The requirement for active, full-time management aims to prevent absentee ownership, which Kitchen Solvers likely believes could negatively impact the business's performance and brand reputation.
For a prospective Kitchen Solvers franchisee, this means that if they plan to incorporate their franchise, they (or a Kitchen Solvers-approved manager) must remain actively and fully involved in the business. This could limit the franchisee's ability to pursue other ventures or take a passive role in the business. The franchisee must also ensure that the corporation's activities are solely focused on operating the Kitchen Solvers franchise.
Additionally, the franchisee must ensure the corporation agrees to be bound by all provisions of the franchise agreement and that the principal owner remains personally liable under the agreement, providing a personal guarantee. This multifaceted approach protects Kitchen Solvers' interests by ensuring both corporate and individual accountability.