Does Aw have the option to require the assignee to execute owner guarantees?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
In addition the following conditions must be met prior to, or concurrently with, the effective date of the assignment:
(e) the assignee (and, if an entity, its direct or indirect owners) have, at our option, executed and agreed to be bound by either: (a) the form of franchise agreement, owner guarantees and such other ancillary agreements as are then customarily used by us in the grant of franchises for a Papa Ray's Pizza Restaurant, which may provide for royalty fees, marketing fund contributions and other fees and terms and conditions that differ from those contained in this Agreement; or (b) an assignment and assumption agreement satisfactory to us whereby the assignee assumes your obligations under this Agreement;
(f) You or the assignee must have paid us a transfer fee of Nine Thousand Dollars ($9,000.00).
In the event the assignee is an existing franchisee that we have approved for an additional franchise, the transfer fee shall be Five Thousand Dollars ($5,000.00);
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, Aw has the option to require the assignee (and, if the assignee is an entity, its direct or indirect owners) to execute owner guarantees. Specifically, prior to the effective date of the assignment, the assignee may be required to execute owner guarantees. These guarantees would be in the form then customarily used by Aw in granting franchises for a Papa Ray's Pizza Restaurant.
This means that if a franchisee wants to sell their Aw franchise to someone else, Aw has the right to demand that the new owner(s) personally guarantee the obligations of the franchise agreement. This is a significant point for potential franchisees to consider. It ensures that Aw can secure financial commitments from the individuals ultimately responsible for the franchise's performance, even if the franchise is owned by a corporate entity.
The new franchise agreement may include royalty fees, marketing fund contributions, and other fees and terms that differ from the original agreement. Alternatively, Aw can require the assignee to sign an assignment and assumption agreement, which transfers all of the original franchisee's obligations to the new owner. In addition to these conditions, the franchisee or the assignee must pay Aw a transfer fee of $9,000, but if the assignee is an existing franchisee that Aw has approved for an additional franchise, the transfer fee is reduced to $5,000.
This provision protects Aw by ensuring that any new franchisee or owner meets their standards and is fully committed to the obligations of the franchise agreement. It also allows Aw to update the terms of the franchise agreement to reflect current standards and fees. Prospective franchisees should be aware of these conditions and factor them into their plans for potentially selling or transferring their franchise in the future.