Are franchisees and owners jointly liable for obligations under the Aplus Franchise Agreement and the Guaranty and Personal Undertaking?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
- 13.6. Persons Bound.
This Agreement shall be binding on the parties and their respective successors and assigns.
As applicable, each Owner shall execute the Guaranty and Personal Undertaking attached as Attachment D.
Failure or refusal to do so shall constitute a breach of this Agreement.
You and each Owner shall be joint and severally liable for each person's obligations hereunder and under the applicable Guaranty and Personal Undertaking.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, franchisees and their owners are jointly and severally liable for obligations under the Franchise Agreement and the Guaranty and Personal Undertaking. This means that Aplus can pursue either the franchisee or the owner, or both, for any breaches or failures to meet the obligations outlined in these documents. This liability extends to each person's obligations under these agreements.
For a prospective Aplus franchisee, this has significant implications. If the franchisee is a business entity (like a corporation or LLC), the owners of that entity must also sign a Guaranty and Personal Undertaking. This makes them personally liable for the business's obligations to Aplus. Therefore, if the Aplus franchise fails to meet its financial or contractual obligations, Aplus can seek recourse not only from the business itself but also from the personal assets of the owners who signed the guaranty.
This arrangement is fairly common in franchising, as franchisors often seek to ensure that there is a responsible party with sufficient assets to cover potential liabilities. The FDD states that failure or refusal of an owner to execute the Guaranty and Personal Undertaking constitutes a breach of the Franchise Agreement. This underscores the importance of understanding and complying with this requirement. Prospective franchisees should carefully review the Guaranty and Personal Undertaking with their legal and financial advisors to fully understand the extent of their personal liability.
In summary, the joint and several liability provision in Aplus's franchise agreement and associated documents means that both the franchisee and its owners share responsibility for upholding the agreement's terms. This arrangement protects Aplus's interests by providing multiple avenues for recourse in case of default or breach. Franchisees and their owners should be fully aware of this liability and its potential consequences before entering into a franchise agreement with Aplus.