Does the All States M.E.D. Franchise Agreement require an Unlimited Guaranty and Assumption of Obligations?

According to All States M.E.D.'s 2024 Franchise Disclosure Document, the franchise agreement requires an Unlimited Guaranty and Assumption of Obligations under certain conditions. Specifically, if a franchisee is a corporation or other business entity, anyone who owns a 5% or greater interest in the entity must personally guarantee the performance of all obligations under the Franchise Agreement. They must also agree to be personally liable for any breach of the Franchise Agreement. This guarantee is formalized by signing the Unlimited Guaranty and Assumption of Obligations, which is attached to the Franchise Agreement as a schedule.

This requirement means that individuals with a significant ownership stake in a franchisee entity (5% or more) are not shielded from personal liability for the franchise's debts and obligations. This is a common practice in franchising, as it provides the franchisor with additional security and recourse in case of default or breach of contract by the franchisee. The personal guaranty ensures that the franchisor can pursue the personal assets of the guarantors to recover any losses.

For a prospective All States M.E.D. franchisee, this means that if you plan to operate the franchise through a corporation or LLC and you or others hold a 5% or greater interest, you and those individuals will need to be prepared to sign the Unlimited Guaranty and Assumption of Obligations. This is a significant commitment, as it puts your personal assets at risk. It is important to carefully review the terms of the guaranty and understand the full extent of your potential liability before signing the Franchise Agreement. You should seek legal counsel to fully understand the implications of this requirement.