What ownership requirements must be met by the Franchisee or holders of interest in the Franchisee regarding the Controlled Entity for a Monicals Pizza franchise?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
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;
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, if a franchisee wishes to transfer their agreement to a Controlled Entity (a corporation, LLC, or other legal entity entirely owned or controlled by the franchisee, formed for financial planning, tax, or other convenience), Monicals Pizza requires specific ownership conditions to be met.
First, the Controlled Entity must be newly organized, or if it's a Franchise Operating Entity, its charter must strictly limit its activities to operating the Monicals Pizza restaurant. Second, the franchisee or all holders of legal or beneficial interest in the franchisee must own all equity and voting power of the outstanding stock or other capital interest in the Controlled Entity. This ensures that the franchisee maintains complete control over the entity operating the Monicals Pizza franchise.
Additionally, all holders of a legal or beneficial interest in the Controlled Entity must enter into an agreement with Monicals Pizza, personally guaranteeing the entity's obligations to the franchisor. Each stock certificate or ownership interest certificate must state that it is subject to all transfer restrictions in the franchise agreement. These requirements ensure Monicals Pizza maintains control over who operates its franchises and that the financial obligations are secured.