What is the definition of a 'Control Transfer' for a Moes Southwest Grill franchise?
Moes_Southwest_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
lated to Section 15.4 (Restrictive Covenants), regardless of the forum in which the dispute is litigated, arbitrated, or otherwise addressed for purposes of resolving the dispute, will be governed by and construed and enforced in accordance with the laws of the state in which your Accepted Location is located, which laws will prevail in the event of any conflict of law.
- 15.7 Unfair Competition. Your breach of any subsection of this Section 15 will constitute unfair competition. You agree that Section 15.2 (Protection of Confidential Information and Trade Secrets) is a reasonable effort under the circumstances to maintain the confidentiality of our Confidential Information and the secrecy of our Trade Secrets.
16. TRANSFER
16.1 Definition of Transfer. For purposes of this Agreement, "Transfer" as a verb means to sell, assign, give away, transfer, pledge, mortgage, or encumber, either voluntarily or by operation of law (such as through divorce or bankruptcy proceedings), any interest in this Agreement, the Franchised Business, substantially all the assets of the Franchised Business, or in the ownership of the franchisee (if you are an Entity). "Transfer" as a noun means any such sale, assignment, gift, transfer, pledge, mortgage, or encumbrance. A "Control Transfer" means any Transfer of (i) this Agreement or any interest in this Agreement; (ii) the Franchised Business or all or substantially all of the Franchised Business's assets;
Source: Item 22 — Contracts (FDD page 92)
What This Means (2025 FDD)
According to Moe's Southwest Grill's 2025 Franchise Disclosure Document, a 'Control Transfer' involves transferring significant control over the franchise. Specifically, it means any transfer of the Franchise Agreement itself, any interest in the agreement, the Franchised Business, or substantially all of the Franchised Business's assets. If the franchisee is an entity, it also includes transferring any 'Controlling Interest' in the franchisee. This can occur directly or indirectly through a transfer of legal or beneficial ownership interests in any owner that is an entity, and it applies whether it's a single transaction or a series of related transactions, regardless of the time period.
A 'Controlling Interest' in the franchisee entity is defined as either 20% or more of the direct or indirect legal or beneficial ownership interests in the entity. It also includes acquiring an ownership interest or other right that grants the power to direct the management and policies of the franchisee or the Franchised Business. This applies to any individual or entity, or group thereof, that did not previously have that power.
For a prospective Moe's Southwest Grill franchisee, this definition is crucial because any transaction meeting this definition requires the franchisor's consent. The franchisor has broad discretion to withhold consent, and specific conditions must be met for a proposed Control Transfer. These conditions include providing advance written notice, ensuring all outstanding sums are paid, and ensuring the franchisee is not in default of any agreements. The transferee must also meet the franchisor's requirements for new franchisees, including completing the Management Training Program. Understanding what constitutes a Control Transfer is essential for any franchisee considering selling their business or altering their ownership structure.
Furthermore, Moe's Southwest Grill requires that for a Control Transfer, the franchisee must notify them in writing at least 90 days prior to the proposed transfer and provide all requested information at least 60 days prior. This allows the franchisor ample time to evaluate the proposed transfer and ensure that the transferee meets their standards. The franchisor also requires that the purchase price and payment terms do not adversely affect the operation of the Franchised Business, and any financing provided by the franchisee must be subordinate to the transferee's obligations to the franchisor.