What must a Pearce Bespoke franchisee do before selling capital stock to a third party?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee is a corporation, the shareholders cannot sell, assign, pledge or otherwise dispose of a controlling interest in the capital stock of Franchisee ("Capital Stock") (except to immediate family members of the controlling shareholder(s) or to a trust established for their benefit) until the Capital Stock has been first offered to Franchisor in writing under the same terms and conditions offered to any third party. A shareholder of Franchisee may, however, bequeath, sell, assign, trade, or transfer his/her Capital Stock to the other shareholders of Franchisee corporation because of death or permanent disability without first offering it to Franchisor, provided Franchisee provides Franchisor with written notice of all such transactions. All shares of Capital Stock issued by Franchisee's corporation to its shareholders must bear the following legend on the reverse side of each issued and outstanding stock certificate:
The shares of capital stock represented by this certificate are subject to a written Franchise Agreement which grants Pearce Bespoke a right of first refusal to purchase these shares of capital stock from the shareholder.
Nothing in this Section will be construed as prohibiting the shares of Capital Stock of a corporate Franchisee from being pledged as security to an institutional lender who has provided financing to or for the Pearce Bespoke Franchise; provided the institutional lender accepts such security interest subject to Franchisor's reasonable conditions. Notwithstanding the foregoing, in the event Franchisee seeks and/or obtains financing whereby funding is provided with the assistance of the United States Small Business Administration ("SBA Financing"), Franchisee shall be permitted to grant the lender of such SBA Financing a senior lien on any collateral Franchisee uses to secure the SBA Financing, and Franchisor and Franchisee further agree that (i) the provisions of Attachment D are fully incorporated herein and applicable to Franchisor and Franchisee, (ii) Franchisor shall subordinate its security interest or other lien on Franchisee's collateral to that of the lender of the SBA Financing and (iii) Franchisor waives the requirement of the written acknowledgement referenced in this Section.
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, if the franchisee is a corporation, shareholders must first offer the capital stock to Pearce Bespoke in writing under the same terms and conditions offered to any third party before selling, assigning, pledging, or disposing of a controlling interest in the capital stock. This requirement does not apply to transfers to immediate family members of the controlling shareholder(s) or to a trust established for their benefit.
However, a shareholder can bequeath, sell, assign, trade, or transfer capital stock to other shareholders within the corporation due to death or permanent disability without offering it to Pearce Bespoke, provided Pearce Bespoke receives written notice of such transactions. All shares issued by the franchisee's corporation must include a legend on the stock certificate indicating Pearce Bespoke's right of first refusal.
This right of first refusal does not prevent shares from being pledged as security to an institutional lender providing financing for the Pearce Bespoke franchise, as long as the lender accepts the security interest subject to Pearce Bespoke's reasonable conditions. If the franchisee obtains financing with the assistance of the United States Small Business Administration (SBA), the franchisee can grant the lender a senior lien on any collateral used to secure the SBA financing, and Pearce Bespoke will subordinate its security interest to that of the lender.