Can the All States M.E.D. franchisor require all holders of a legal or beneficial interest in the transferee to be personally bound by the agreement?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
- (i) the transferee, or all holders of a legal or beneficial interest in the transferee, has agreed to be personally bound jointly and severally by all provisions of this Agreement for the remainder of its term by executing a personal guaranty in such form as prepared by Franchisor;
- (h) Franchisee, or the transferee, has paid to Franchisor, before the transaction is completed, a transfer fee in the amount of $15,000;
Source: Item 23 — RECEIPTS (FDD pages 44–174)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, if a franchisee seeks to transfer their franchise to a third party, All States M.E.D. can require all holders of a legal or beneficial interest in the transferee to agree to be personally bound by all the provisions of the franchise agreement for the remainder of its term. This is accomplished through the execution of a personal guaranty in a form prepared by All States M.E.D.
This requirement ensures that All States M.E.D. has recourse against individuals with a vested interest in the franchise's success, not just the transferee entity itself. By having all holders of a legal or beneficial interest personally guarantee the agreement, All States M.E.D. aims to mitigate the risk of non-compliance or default by the transferee.
This condition is one of several that must be met before All States M.E.D. will approve the transfer of a franchise. Other conditions include payment of a $15,000 transfer fee, completion of a training program, and execution of a non-disclosure and non-competition agreement. These measures are in place to protect All States M.E.D.'s brand standards and ensure the continued success of the franchise system under new ownership.