Under what circumstances does the non-recourse provision of the Aerus guaranty obligation not apply?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding the generality of the foregoing provisions or any other contrary provision hereof, the guaranty obligation contemplated hereunder shall be non-recourse and shall not apply except in the following cases: (i) fraud or misrepresentation in connection with the execution or performance of the Franchise Agreement, the Note or any other Financing Agreements; (ii) theft or conversion of the assets of Lender or any of Lender's affiliates (including Aerus LLC) including any consigned goods or proceeds from the sale of any consigned good (which may include selling such consigned goods at prices below the required prices); (iii) misuse or infringement of any trademark or other item of intellectual property or right owned or licensed by Lender or any of Lender's affiliates (including Aerus LLC); or (iv) breach or violation of any license granted under the Franchise Agreement concerning such trademarks and intellectual property.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, the guaranty obligation is generally non-recourse, meaning the guarantor's personal assets are protected. However, this non-recourse provision does not apply under specific circumstances.
The non-recourse provision is waived if there is fraud or misrepresentation connected to the execution or performance of the Franchise Agreement, the Note, or any other Financing Agreements. This means that if a franchisee provides false information or engages in deceptive practices related to these agreements, they can be held personally liable despite the general non-recourse provision.
Additionally, the non-recourse provision does not apply in cases of theft or conversion of Aerus's assets, including consigned goods or proceeds from their sale, especially if the goods are sold below the required prices. Misuse or infringement of Aerus's trademarks or intellectual property, or any breach of the license granted under the Franchise Agreement concerning these trademarks and intellectual property, also voids the non-recourse protection. Therefore, franchisees must adhere strictly to the terms of the franchise agreement and protect Aerus's assets and intellectual property to maintain the benefits of the non-recourse guaranty.