For The Standardx franchise, what constitutes a Controlling Ownership Interest?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
A "Controlling Ownership Interest" in you or one of your owners (if that owner is a legal entity) means, whether directly or indirectly, either: (a) the record or beneficial ownership of, or right to control, 50% or more of the investment capital, equity, rights to receive profits or losses, or other rights to participate in your or the entity's results; or (b) the effective control of the power to direct or cause the direction of your or that entity's management and policies, including a general partnership interest (if the entity is a partnership) and a manager or managing member interest (if the entity is a limited liability company), or the power to appoint or remove any party having these powers. In addition, in the case of (a) or (b), the determination of whether a "Controlling Ownership Interest" exists is made both immediately before and immediately after a proposed transfer.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 71–74)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, a "Controlling Ownership Interest" is defined in terms of ownership percentage and control over management and policies. This definition is important because owners with a Controlling Ownership Interest may be required to sign a Guaranty, personally guaranteeing the franchisee's obligations.
Specifically, a Controlling Ownership Interest exists if an owner has either (a) the record or beneficial ownership of, or right to control, 50% or more of the investment capital, equity, rights to receive profits or losses, or other rights to participate in the entity's results; or (b) the effective control of the power to direct or cause the direction of the entity's management and policies. This includes a general partnership interest (if the entity is a partnership) and a manager or managing member interest (if the entity is a limited liability company), or the power to appoint or remove any party having these powers.
The determination of whether a Controlling Ownership Interest exists is made both immediately before and immediately after a proposed transfer. This is to prevent someone from temporarily ceding control to avoid obligations related to the franchise agreement. This definition ensures that individuals or entities with significant financial stake or decision-making power in The Standardx franchise are held accountable for the franchise's performance and compliance with the franchise agreement.