How does the issuance of securities by an applicant affect the definition of 'Assignment' in the Marble Slab Creamery agreement?
Marble_Slab_Creamery Franchise · 2025 FDDAnswer from 2025 FDD Document
"Assignment" means:
- (i) the direct or indirect, voluntary or involuntary, sale, assignment, transfer, conveyance, gift, pledge, mortgage, hypothecation, or encumbrance, in whole or in part, of:
- (A) this Agreement, or
- (B) all or any substantial portion of the assets of the Restaurant. or
- (ii) the direct or indirect, voluntary or involuntary, sale, assignment, transfer, conveyance, gift, pledge, mortgage, or encumbrance of 10% or more, in the aggregate, whether in one or more transactions, of the Equity or voting power of Applicant, by operation of law or otherwise, or any other event(s) or transaction(s) which, directly or indirectly, effectively changes control of Applicant;
- (iii) the issuance of any securities by Applicant which by itself or in combination with any other transaction(s) results in its Owners, as constituted on the Effective Date, owning, on an asconverted or as-exercised basis, less than 90% of the outstanding Equity or voting power of Applicant;
- (iv) if Applicant is a Partnership, the resignation, removal, withdrawal, death or legal incapacity of a general partner or of any limited partner owning 10% or more, in the aggregate, whether in one or more transactions, of the Partnership Rights of the Partnership, or the admission of any
additional general partner, or the transfer by any general partner of any of its Partnership Rights in the Partnership, or any change in the ownership or control of any general partner;
(v) the death or legal incapacity of any Owner of Applicant owning 10% or more of the Equity or voting power of Applicant;
(vi) any merger, stock redemption, consolidation, reorganization, recapitalization or other transfer of control of Applicant, however effected; or
Source: Item 23 — RECEIPT (FDD pages 101–346)
What This Means (2025 FDD)
According to the 2025 Marble Slab Creamery Franchise Disclosure Document, the issuance of securities by an applicant can trigger a condition defined as an 'Assignment.' Specifically, if the issuance of any securities by the applicant, either alone or combined with other transactions, results in the original owners (as of the effective date of the agreement) owning less than 90% of the outstanding equity or voting power, it is considered an assignment. This provision ensures that the original owners maintain significant control and equity in the Marble Slab Creamery franchise.
This definition of 'Assignment' has significant implications for a prospective Marble Slab Creamery franchisee. If the franchisee plans to raise capital by issuing securities, they must ensure that the original owners retain at least 90% of the equity and voting power. Failure to do so would be considered a transfer of control, triggering the assignment clause and potentially requiring franchisor approval, which may or may not be granted. This could limit the franchisee's ability to raise capital or restructure their ownership without the franchisor's consent.
This type of clause is relatively common in franchise agreements, as franchisors want to maintain control over who operates their franchises and ensure that the original franchisee remains committed to the business. Prospective Marble Slab Creamery franchisees should carefully consider this provision and its potential impact on their ability to manage and finance the franchise in the future. It is advisable to discuss this clause with a legal advisor to fully understand the implications and explore potential strategies for managing ownership and control while complying with the franchise agreement.