Can shares be issued or transferred without written consent from Mr. Sandless?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
- 21.6.5 Each stock certificate must be conspicuously endorsed upon its face with a statement in form satisfactory to us that it is held subject to, and that further assignment or transfer is subject to, all restrictions imposed upon assignment by this Agreement. In addition, a corporate franchisee's shareholders' agreement, if any, or a limited liability company's operating agreement, as applicable, must restrict transfer of interests to third parties;
- 21.6.6 The articles of incorporation and bylaws of the corporation, or the operating agreement or other governing document of the limited liability company, shall reflect this Agreement and all other agreements we specify, and the transferee must submit to us such documents relating to the corporation or limited liability company as we may require;
- 21.6.7 No shares may be issued or transferred without our written consent;
- 21.6.8 No changes to the corporation or limited liability company's governing documents may be made without our express written consent;
- 21.6.9 No shares may be pledged as collateral for any corporate or limited liability company obligations without our express written consent;
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2025 FDD)
According to the 2025 Mr. Sandless Franchise Disclosure Document, if a franchisee operates as a corporation or limited liability company, no shares may be issued or transferred without the express written consent of Mr. Sandless. This requirement is put in place to ensure that Mr. Sandless maintains control over who becomes involved in the ownership of a franchise location.
This stipulation is significant for prospective franchisees because it means that if they choose to structure their Mr. Sandless business as a corporation or LLC, they cannot freely issue or transfer shares to investors, partners, or other parties without first obtaining approval from Mr. Sandless. This could potentially limit the franchisee's ability to raise capital or restructure ownership in the future.
Mr. Sandless also requires that each stock certificate be conspicuously endorsed with a statement indicating that it is subject to transfer restrictions outlined in the Franchise Agreement. Furthermore, any shareholders' agreement or operating agreement must also restrict the transfer of interests to third parties. These measures reinforce Mr. Sandless's control over ownership changes and ensure compliance with the franchise agreement.
In addition, Mr. Sandless requires express written consent before shares can be pledged as collateral for any corporate or limited liability company obligations. This provision further protects Mr. Sandless's interests by preventing franchisees from using ownership shares in a way that could jeopardize the stability or operation of the franchise.