Who is required to personally guarantee the Franchisee's obligations under the Aerus Franchise Agreement?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
If the Franchise Agreement is signed by a corporation, partnership, limited liability company (or any entity other than a natural person), at least one of the entity's principals (whom we refer to in the Franchise Agreement and in this Disclosure Document as the "Operating Principal") must personally participate in the day-to-day operation of the Franchised Business. If you sign the Franchise Agreement as an individual, you will be the Operating Principal and will be required to personally participate in the day-to-day operation of the Franchised Business.
Your Operating Principal must personally guarantee the Franchisee's obligations under the Franchise Agreement. All parties whom we designate as your principals (those owning at least
ten percent (10%) of the Franchised Business) must also personally guarantee your obligations under the Franchise Agreement. Other than your Operating Principal, none of your managers are required to maintain an ownership interest in you or the Franchised Business.
Source: Item 15 — Obligation to Participate in the Actual Operation of the Franchise Business (FDD pages 53–54)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, the Operating Principal is required to personally guarantee the franchisee's obligations under the Franchise Agreement. If the franchisee is an individual, that individual will be the Operating Principal. If the franchisee is a corporation, partnership, limited liability company, or another entity, at least one of the entity's principals must be the Operating Principal.
In addition to the Operating Principal, all parties whom Aerus designates as principals (those owning at least ten percent (10%) of the franchised business) must also personally guarantee the obligations under the Franchise Agreement. This means that any individual or entity with a significant ownership stake in the Aerus franchise may be required to provide a personal guarantee.
This requirement is fairly standard in franchising, as it provides Aerus with additional security and recourse in the event of a franchisee default. By requiring personal guarantees, Aerus ensures that individuals with a vested interest in the franchise's success are personally liable for its financial obligations. This can encourage more responsible management and financial practices. Franchisees should carefully consider the implications of providing a personal guarantee before entering into a franchise agreement, as it could expose their personal assets to risk.