What is a 'Controlled Entity' in the context of transferring a Monicals Pizza franchise agreement?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
18.3 Transfer to a Controlled Entity
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 'Controlled Entity' is defined within the context of transferring a franchise agreement. Specifically, it refers to a corporation, limited liability company, or other legal entity that is entirely owned or controlled by the franchisee. This type of entity is typically formed for the franchisee's financial planning, tax, or other convenience.
If a Monicals Pizza franchisee wishes to transfer their franchise agreement to a Controlled Entity, the franchisor's consent is contingent upon meeting certain requirements. These include ensuring the Controlled Entity is newly organized or that its charter restricts activities exclusively to operating the franchised restaurant. Additionally, the franchisee or all holders of legal/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 the existing franchise agreement, with all obligations to Monicals Pizza fully satisfied.
Furthermore, the Controlled Entity must enter into a written agreement with Monicals Pizza, expressly assuming all obligations of the original franchise agreement and any related agreements. If any other party's consent is required for these agreements, the franchisee must obtain it in writing and provide it to Monicals Pizza. All holders of interest in the Controlled Entity must also enter into an agreement personally guaranteeing the Controlled Entity's financial and performance obligations to Monicals Pizza. Finally, each ownership certificate of the Controlled Entity must have a statement indicating that it is subject to all transfer restrictions outlined in the franchise agreement.
This definition and the associated conditions are important for prospective Monicals Pizza franchisees to understand, as they outline the specific procedures and requirements for transferring the franchise to a business entity they control. This ensures that Monicals Pizza maintains control over who operates its franchises and that the obligations of the franchise agreement are upheld even when the franchise is operated through a Controlled Entity.