Are Owners jointly and severally liable for obligations under the Aplus 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, the franchise agreement stipulates that both the franchisee and each Owner are jointly and severally liable for obligations under the agreement and the Guaranty and Personal Undertaking. This requirement is outlined in Section 13.6, titled 'Persons Bound,' of the franchise agreement. Furthermore, each Owner must execute the Guaranty and Personal Undertaking, which is included as Attachment D to the agreement. Failure to comply with this requirement constitutes a breach of the agreement.
In practical terms, this means that if Aplus grants you a franchise, each individual or entity with a beneficial ownership interest in the franchisee business is responsible for the full scope of the obligations. This includes all shareholders of a corporation, members of a limited liability company, general and limited partners of a partnership, and the grantor and the trustee of a trust. If the franchisee fails to meet its obligations, Aplus can pursue any or all of the Owners for the full amount owed, regardless of their individual ownership percentage or involvement in the business's daily operations.
This clause is a significant risk factor for potential Aplus franchisees, particularly those involving multiple owners or complex ownership structures. Prospective franchisees should carefully consider the implications of joint and several liability and consult with legal and financial advisors to fully understand their potential exposure. It is also important to note that the Guaranty and Personal Undertaking (Attachment D) should be reviewed thoroughly to understand the specific obligations and liabilities it imposes on each Owner.