Who must sign a guaranty if the new Angry Chickz franchisee is a business entity?
Angry_Chickz Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Franchise Agreement | Summary |
|---|---|---|
| assign to us (at our option) all internet web pages, email address, social media listings, domain names and other registrations containing the marks. If applicable, pay liquidated damages. See also "r" below. | ||
| j. Assignment of | § 13.1 | No restriction on our right to assign. |
| contract by | ||
| Franchisor | ||
| k. "Transfer" by | § 13.2.1 | Includes transfer of the agreement or change in ownership of a franchisee which is an entity. |
| franchisee – defined | ||
| Franchisor approval of transfer | § 13.2 | Transfers require our express written consent You must: (i) provide a detailed description of the price and material terms of the transfer/Assignment; (ii) provide us a list of your Owners and others with an interest in the franchise agreement; (iii) have complied with the right of first refusal and we must not have exercised our right of first refusal; (iv) not be in default; (v) be current to your obligations to third parties; (vi) have signed a release and your Owners must have signed a release; (vii) not have any suit or action pending or threatened with respect to your Angry Chickz Restaurant; (viii) pay the Transfer Fee; and (ix) agree to a non-competition agreement accepted to us which agreement is substantially similar to the Franchise Agreement terms. |
| m. Conditions for franchisor approval of transfer | §§ 13.2 – 13.4 | New franchisee must: (i) qualify; (ii) have the right to occupy the location by assignment or assumption of the lease or purchase of the location; (iii) assume the Franchise Agreement or sign a new Franchise Agreement; (iv) agree to refurbish your Angry Chickz Restaurant; and (v) complete training. The franchisee's rights to receive payments in connection with the transfer must be subordinated to our rights to receive payment and the other obligations to us. (See also "r" below). If the new franchisee is a business entity, all holders of a 20% or greater interest in the new franchisee must sign a guaranty. You must reimburse us for all costs and expenses that we incur in connection with such a transfer, including attorneys' fees. |
Source: Item 17 — RENEWAL, TERMINATIONS, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 39–48)
What This Means (2025 FDD)
According to Angry Chickz's 2025 Franchise Disclosure Document, specifically Item 17, if a new franchisee is a business entity, all individuals holding a 20% or greater interest in that entity must sign a guaranty. This requirement ensures that individuals with significant ownership in the franchisee business are personally responsible for upholding the franchise agreement.
This condition is triggered during the transfer of an Angry Chickz franchise to a new franchisee that is a business entity. The franchisor, Angry Chickz, needs to approve the transfer, and one of the conditions for approval is that all individuals with a substantial ownership stake (20% or greater) in the new franchisee entity must sign a guaranty.
The purpose of this guaranty is to provide Angry Chickz with additional security and assurance that the obligations under the franchise agreement will be met. By requiring personal guarantees from major stakeholders, Angry Chickz reduces its risk in the event the franchisee business fails to meet its financial or operational commitments. This is a fairly standard practice in franchising, as it aligns the interests of the franchisor and the significant owners of the franchisee business, ensuring a higher level of commitment and accountability.
Prospective Angry Chickz franchisees should be aware of this requirement, especially if they plan to operate their franchise through a business entity. They should also consider the implications of having their owners sign a personal guarantee, as it could expose their personal assets to liability in the event of a default under the franchise agreement.