Does the All States M.E.D. Franchise Agreement require an Unlimited Guaranty and Assumption of Obligations as outlined in Schedule 3?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
22.5 Unlimited Guaranty and Assumption of Obligations
All holders of a legal or beneficial interest in Franchisee of five percent (5%) or greater shall be required to execute, as of the date of this Agreement, the Unlimited Guaranty and Assumption of Obligations attached as Schedule 3, through which such holders agree to assume and discharge all of Franchisee's obligations under this Agreement and to be personally liable hereunder for all of the same.
Source: Item 22 — CONTRACTS (FDD page 44)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, the Franchise Agreement does require an Unlimited Guaranty and Assumption of Obligations as outlined in Schedule 3. Specifically, all individuals holding a legal or beneficial interest of five percent (5%) or greater in the franchisee are required to execute this guaranty. This requirement is effective as of the date of the Franchise Agreement.
The Unlimited Guaranty and Assumption of Obligations means that these individuals agree to assume and fulfill all of the franchisee's obligations under the Franchise Agreement. They also become personally liable for all of the franchisee's obligations. This is a standard practice in franchising, as it ensures that the franchisor has recourse to the personal assets of the owners if the franchisee entity fails to meet its obligations.
Schedule 3 to the Franchise Agreement is titled "UNLIMITED GUARANTY AND ASSUMPTION OF OBLIGATIONS". The document included in Item 23 states that each of the undersigned personally and unconditionally guarantees to All States M.E.D. and its successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement, that the Franchisee shall punctually pay and perform each and every undertaking, agreement and covenant in the Agreement. Each of the undersigned shall be personally bound by, and personally liable for, Franchisee's breach of any provision in the Agreement, including those relating to monetary obligations and obligations to take or refrain from taking specific actions or engaging in specific activities, such as those contemplated by Sections 6, 7, and 17 of the Agreement.
Prospective franchisees should carefully review Schedule 3 and understand the full extent of the personal liability they are undertaking. They should also consult with an attorney and financial advisor to assess the risks and implications of signing such a guaranty.