What is the timeframe within which the Representative of a deceased or mentally incompetent person with a Controlling Ownership Interest in The Standardx must transfer the Owner's interest, according to Section 12.7?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
- 12.7 Transfers of Equity Interest Upon Death.
Upon the death or mental incompetency of a person with a Controlling Ownership Interest in Franchisee or one of its Controlling Owners, that person's executor, administrator, or personal representative ("Representative") must, within six (6) months after the date of death or mental incompetency, transfer the Owner's interest in Franchisee or the Controlling Owner to a third party or to the other
Owner(s) of Franchisee, if any, subject to the conditions set forth in Section 12.4(a), 12.4(b), and 12.4(f) above, and provided that at least one Guarantor that satisfies the Guarantor Monetary Threshold (as it may be increased in accordance with Exhibit B-1). In the case of a transfer by devise or inheritance, if the heirs or beneficiaries cannot meet the foregoing conditions within this six (6)-month period, the Representative will have twelve (12) months from the date of death or mental incompetency to dispose of the interest in accordance with this Section 12.7. If this required transfer does not occur within the required timeframe, Hyatt shall have the right to terminate this Agreement upon written notice to Franchisee, provided that Franchisee will not be liable for liquidated damages pursuant to Section 16.5 or Brand Damages in connection with such termination.
Source: Item 18 — OTHER INCOME (LOSS), NET (FDD pages 187–399)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, Section 12.7 addresses the transfer of equity interest upon death or mental incompetency of a person with a Controlling Ownership Interest. The Representative, such as an executor or administrator, has an initial six-month period from the date of death or mental incompetency to transfer the Owner's interest in The Standardx franchise. This transfer can be to a third party or to other existing owners of the franchise, subject to certain conditions outlined in other sections of the agreement (12.4(a), 12.4(b), and 12.4(f)) and the requirement that at least one Guarantor meets the Guarantor Monetary Threshold.
However, The Standardx franchise agreement allows for an extension of this timeframe under specific circumstances. If the heirs or beneficiaries are unable to meet the conditions for transfer within the initial six-month period, the Representative is granted an additional six months, extending the total timeframe to twelve months from the date of death or mental incompetency, to dispose of the interest. This extension provides some flexibility for the Representative to manage the transfer process, especially in complex estate situations.
It's important to note that failure to complete the transfer within the specified timeframe can have significant consequences. If the transfer does not occur within the required six or twelve-month period, The Standardx has the right to terminate the franchise agreement. However, in the event of such termination due to the death or mental incompetency of the owner, the franchisee will not be liable for liquidated damages or brand damages typically associated with early termination, offering some protection to the franchisee's estate.