What is Attachment D to the Aplus Franchise Agreement, and who is required to sign it during ownership transfers?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
As applicable, each Owner shall execute the Guaranty and Personal Undertaking attached as Attachment D.
- 8.3.
Transfer Among Owners; Transfer of Non-Controlling Interest.
If you are a Business Entity, your Owners may transfer their ownership interests in the Business Entity among each other, and may transfer up to a Non-Controlling Interest in the Business Entity to one or more third parties, if: (a) you have provided to Franchisor advance notice of the transfer; (b) Attachment C to this Agreement has been amended to reflect the new ownership; (c) each new Owner has signed a Guaranty and Personal Undertaking in the form of Attachment D; (d) each previous and/or new Owner has signed a general release in favor of Franchisor and in the form Franchisor requires, and (d) you pay to Franchisor a $2,500 administrative fee.
- 8.4.7.
If the transferee is a Business Entity, then the transferee's Owners each shall sign Franchisor's standard form of Guaranty and Personal Undertaking; and
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, Attachment D to the Aplus Franchise Agreement is the Guaranty and Personal Undertaking. This document is referenced in the context of ownership transfers. Specifically, if the transferee is a business entity, each of the transferee's owners must sign Aplus's standard form of Guaranty and Personal Undertaking. Additionally, when a business entity's owners transfer their ownership interests among each other or transfer a non-controlling interest to a third party, each new owner must sign a Guaranty and Personal Undertaking in the form of Attachment D.
The Guaranty and Personal Undertaking essentially means that the individual signing it is personally guaranteeing the obligations of the franchisee entity. This is a common practice in franchising, as it ensures that Aplus has recourse to the personal assets of the owners if the business entity fails to meet its financial or contractual obligations. This requirement mitigates Aplus's risk by holding individuals accountable for the performance of the franchise.
For a prospective Aplus franchisee, this means that if you are setting up a business entity to operate the franchise, you and any future owners will be required to personally guarantee the franchise agreement. This is a significant commitment, as it puts your personal assets at risk. It is important to carefully consider the implications of signing a Guaranty and Personal Undertaking and to seek legal advice before doing so. Franchisees should fully understand the extent of their personal liability and the circumstances under which Aplus could pursue their personal assets.
It is also important to note that the FDD mentions Attachment C is amended to reflect the new ownership when ownership interests are transferred among owners or a non-controlling interest is transferred. This ensures that Aplus maintains accurate records of the ownership structure of its franchisees. Prospective franchisees should review both Attachment C and Attachment D carefully to understand their obligations and the implications of ownership changes.