What ownership interest must the Operating Principal have in the Lees Famous Recipe restaurant?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
You (as an individual) may assign this Agreement to a corporation or a limited liability company that conducts no business other than the Restaurant (or other Lee's Famous Recipe Restaurants under franchise agreements with us), provided: (1) the Restaurant is actively managed by you or an operating manager approved by us; (2) you own one hundred percent (100%) of the ownership interest in the corporation or limited liability company; (3) you and all Principal Owners of the assignee entity sign the Guaranty attached hereto as Exhibit D; (4) you provide us thirty (30) days' written notice before the proposed date of assignment of this Agreement to the corporation or limited liability company; and (5) you provide us a certified copy of the articles of incorporation, operation agreement, organizational documents, and a list of all shareholders or members having beneficial ownership, reflecting their respective interest in the assignee entity.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 53–54)
What This Means (2025 FDD)
According to Lees Famous Recipe's 2025 Franchise Disclosure Document, a franchisee may assign their Franchise Agreement to a corporation or limited liability company if certain conditions are met. One of these conditions is that the franchisee owns 100% of the ownership interest in the corporation or limited liability company.
This means that if a franchisee wants to transfer the agreement to a business entity, they must maintain complete ownership of that entity. This requirement ensures that the franchisee retains full control over the restaurant's operations and financial decisions, even if the business is structured as a corporation or LLC. Lees Famous Recipe wants to ensure the person in charge has complete control over the restaurant.
This condition is in place to protect Lees Famous Recipe's interests by ensuring that the franchisee remains fully committed to the business and is not merely a passive investor. By requiring 100% ownership, Lees Famous Recipe aims to maintain a consistent level of operational standards and brand integrity across all franchised locations. This also allows Lees Famous Recipe to be sure that the person in charge is properly trained and has the same business acumen as Lees Famous Recipe expects of its franchisees.
Prospective franchisees should carefully consider this requirement when planning their business structure. If they intend to bring in partners or investors, they may need to explore alternative ownership arrangements that comply with Lees Famous Recipe's stipulations. It is important to discuss these requirements with Lees Famous Recipe during the franchise application process to ensure full compliance and avoid any potential issues down the line.