Under what circumstances is a change in ownership of a Management Recruiters franchise considered a 'deemed assignment'?

According to Management Recruiters' 2024 Franchise Disclosure Document, a 'deemed assignment' occurs under specific conditions related to the ownership structure of the franchise. If the franchisee is a corporation or limited liability company, certain transactions can trigger a 'deemed assignment'. These transactions include the issuance of securities, the transfer of stock or voting power, or any merger or consolidation involving the franchisee.

The key factor is whether these transactions result in the original Principals (owners) of the Management Recruiters franchise owning or controlling less than 51% of the aggregate voting power of the franchise. If the ownership falls below this threshold due to any of the mentioned transactions, it is considered a 'deemed assignment'.

This provision is important for prospective Management Recruiters franchisees who plan to operate under a corporate or LLC structure. It means that any significant changes in the ownership or control of the business entity must be carefully managed to avoid triggering a 'deemed assignment,' which could have implications under the franchise agreement. Franchisees need to seek prior written approval from Management Recruiters for such changes.