What specific language must be included on all certificates representing equity interests when a Stretch Zone franchisee transfers the agreement to a business entity?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
All certificates representing equity interests must bear the following legend:
The Percentage of Membership Interests represented by this Certificate is subject to the terms of the Franchise Agreement between the Company and Stretch Zone Franchising LLC dated
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to the 2025 Stretch Zone Franchise Disclosure Document, if a franchisee transfers their agreement to a business entity, all certificates representing equity interests must include a specific legend. This legend serves to inform any potential investor in the franchisee's business entity that their ownership stake is subject to the terms and restrictions outlined in the Franchise Agreement between the company and Stretch Zone Franchising LLC. The legend also indicates that a copy of the Franchise Agreement is available for review at the company's principal office.
This requirement ensures that anyone acquiring an interest in the franchisee's business is aware of the overarching Franchise Agreement and its potential impact on their investment. It protects Stretch Zone by maintaining control over who ultimately benefits from a franchise, even indirectly through ownership in a franchisee's business entity.
For a prospective Stretch Zone franchisee, this means that if they plan to operate their franchise through a business entity, they must ensure that all equity certificates issued by that entity contain the prescribed language. This is a non-negotiable requirement and failure to comply could potentially lead to issues with Stretch Zone regarding adherence to the Franchise Agreement. Franchisees should consult with legal counsel to ensure full compliance when structuring their business.