What is the role of a Guaranty and Assumption of Obligations in an All Team franchise transfer?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
atives or conservators, as applicable, meet ATFC's standards for new franchisees; execute the then-current form of Franchise Agreement; and, that a manager has, or within thirty days, shall have satisfactorily completed ATFC's Initial Training Program.
- D. Transfer to a Corporation or Limited Liability Company. If FRANCHISEE is an individual or partnership, ATFC will consent to an assignment if FRANCHISEE transfers the business and rights under this Agreement to a corporation or limited liability company which is wholly owned by the FRANCHISEE (or all the partners of a partnership FRANCHISEE), provided that the corporation assumes all liabilities and obligations under this Agreement and pays a transfer fee of Two Thousand Dollars ($2,000.00) to ATFC, to defray the transfer costs and expenses. FRANCHISEE and FRANCHISEE's spouse (and, if a partnership, all partners and their spouses) shall be required to execute a personal guaranty and assumption of obligations and covenant to ensure the compliance by the corporation or limited liability company with the terms and obligations of this Agreement as well as personally supervise the operation of the Agency. The Transfer is not effective until an assignment form is signed by all transferors, the transferee, and ATFC. If FRANCHISEE is incorporated prior to purchase of the franchise, no transfer fee is required, but personal guarantees must be signed by the owners of the business and their spouses.
- E. Right of First Refusal. Notwithstanding the foregoing, if FRANCHISEE receives a bona fide, executed, written offer to acquire the franchise (or any stock in a corporate FRANCHISEE, or interest in a partnership or limited liability FRANCHISEE) from a responsible, fully disclosed purchaser, FRANCHISEE must submit a copy of the offer to ATFC. FRANCHISEE must also provide ATFC with any other information it requests to evaluate the offer. ATFC has the right, exercisable by delivering written notice to the FRANCHISEE within thirty (30) days from the date of last delivery to ATFC of the offer and any other documents requested by ATFC, to acquire the Interest for the price and on the terms and conditions contained in the offer. Regardless of the terms of the offer, however, ATFC may, in its discretion: substitute cash for any form of payment proposed in the offer; require the FRANCHISEE to include customary warranties and representations in the purchase agreement; and structure the transaction as an "asset purchase", rather than a "stock purchase". ATFC will not be obligated to pay any "finder's" or broker's fees that are a part of the proposed sale and shall not be obligated to comply with any part of the offer which directly or indirectly requires payment of any consideration other than a bona fide purchase price for the Interest proposed to be transferred.
If ATFC declines to exercise its rights of first refusal, FRANCHISEE will have ninety (90) days after ATFC declines or the right expires, whichever first occurs, to sell the Interest upon terms no more favorable than those offered to ATFC, subject to the compliance with and satisfaction of the conditions set forth in Section XVI.B.
Source: Item 22 — CONTRACTS (FDD pages 33–34)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, a Guaranty and Assumption of Obligations plays a significant role in franchise transfers. Specifically, if a franchisee transfers their All Team franchise to a corporation or limited liability company, the franchisee and their spouse (or all partners and their spouses, if the franchisee is a partnership) are required to execute a personal guaranty and assumption of obligations. This ensures that the corporation or LLC complies with the terms and obligations of the Franchise Agreement and that the franchisee personally supervises the agency's operation. This requirement is in place to provide All Team with assurance that the obligations of the franchise agreement will continue to be met even after the transfer to a corporate entity.
Furthermore, when All Team approves a sale, transfer, or change in ownership, the transferee (the party acquiring the franchise) must also execute a Guaranty and Assumption of Obligations. This document ensures that the transferee agrees to assume all liabilities and obligations from the prior operation of the All Team agency, including the lease. This is a standard practice in franchising to protect the franchisor from potential liabilities arising from the previous franchisee's operations. The transferee may also be required to execute a new Franchise Agreement which may contain different terms and conditions than the original agreement.
Additionally, the original franchisee, including all officers, directors, shareholders, and guarantors, must execute a general release, in a form approved by All Team, releasing any claims against All Team and its affiliates. However, All Team retains the discretion to require the original franchisee and guarantors to remain liable for the full performance of the assignee's obligations, even after the transfer. This continuing liability clause provides All Team with an additional layer of security and ensures the ongoing success of the franchise. If All Team has to enforce the Guaranty and Assumption of Obligations in court, the guarantors are responsible for reimbursing All Team for all associated costs and expenses, including attorney's fees.