What compliance obligations must the Franchisee meet to transfer to a Controlled Entity for a Monicals Pizza franchise?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
18.3.1 If Franchisee wishes to transfer this Agreement or any interest herein to a corporation, limited liability company or other legal entity which shall be entirely owned by, or controlled by, Franchisee ("Controlled Entity"), which Controlled Entity is being formed for the financial planning, tax or other convenience of Franchisee, Franchisor's consent to such transfer shall be conditioned upon the satisfaction of the following requirements:
18.3.1.1 the Controlled Entity is newly organized or the Franchise Operating Entity and its charter provides that its activities are confined exclusively to the operation of the Franchised Restaurant;
18.3.1.2 Franchisee or all holders of a legal or beneficial interest in Franchisee own all of the equity and voting power of the outstanding stock or other capital interest in the Controlled Entity;
18.3.1.3 Franchisee is in compliance with all of the provisions of this Agreement, and all obligations of Franchisee to Franchisor or any Affiliate are fully paid and satisfied; provided, however, that neither Franchisee nor the Controlled Entity shall be required to pay a transfer fee as required pursuant to Section 18.2.8;
18.3.1.4 the Controlled Entity has entered into a written agreement with Franchisor expressly assuming the obligations of this Agreement and all other agreements relating to the operation of the Franchised Restaurant.
If the consent of any other party to any such other agreement is required, Franchisee has obtained such written consent and provided the same to Franchisor prior to consent by Franchisor;
18.3.1.5 all holders of a legal or beneficial interest in the Controlled Entity have entered into an agreement with Franchisor jointly and severally personally guaranteeing the full payment of the Controlled Entity's obligations to Franchisor and the performance by the Controlled Entity of all the obligations of this Agreement;
18.3.1.6 each stock certificate or other ownership interest certificate of the Controlled Entity has conspicuously endorsed upon the face thereof a statement in a form satisfactory to Franchisor that it is held subject to, and that further assignment or transfer thereof is subject to, all restrictions imposed upon transfers and assignments by this Agreement; and
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, a franchisee looking to transfer their franchise to a Controlled Entity must meet several requirements to gain the franchisor's consent. A "Controlled Entity" refers to a corporation, limited liability company, or other legal entity entirely owned or controlled by the franchisee, typically formed for financial planning, tax, or other convenience.
First, the Controlled Entity must be newly organized, or its charter must strictly confine its activities to operating the Monicals Pizza franchised restaurant. The franchisee, or all holders of legal or beneficial interest in the franchisee, must own all equity and voting power in the Controlled Entity. The franchisee must also be in full compliance with all provisions of the Franchise Agreement, ensuring all financial obligations to Monicals Pizza or its affiliates are fully satisfied. Notably, neither the franchisee nor the Controlled Entity is required to pay a transfer fee for this type of transfer.
Furthermore, the Controlled Entity must enter into a written agreement with Monicals Pizza, expressly assuming all obligations under the existing Franchise Agreement and any other agreements related to the restaurant's operation. If any other party's consent is required for these agreements, the franchisee must obtain and provide this consent to Monicals Pizza before the franchisor grants its approval. All holders of legal or beneficial interest in the Controlled Entity must also enter into an agreement personally guaranteeing the Controlled Entity's financial obligations and performance under the Franchise Agreement. Finally, each stock certificate or ownership interest certificate of the Controlled Entity must have a conspicuous statement, in a form satisfactory to Monicals Pizza, indicating that it is subject to all transfer restrictions imposed by the Franchise Agreement.