For Belocal franchises, what is the purpose of the 'Undertaking' section in the franchise agreement?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
In consideration of, and as an inducement to, the execution of that certain Franchise Agreement, and any revisions, modifications, and amendments thereto, (collectively, "Agreement") by and between N2 Franchising, Inc. ("Franchisor"), and [Franchisee], ("Franchisee"), and dated [Insert Date of Agreement]), the undersigned (each, a "Principal") agree(s) as follows:
Each Principal acknowledges and agrees as follows:
(a) The undersigned is a "Principal," as defined in the Agreement, and has read the terms and conditions of the Agreement and acknowledges that the execution of this Principal's Undertaking is in partial consideration for, and a condition to, Franchisor entering into the Agreement with Franchisee and that Franchisor would not have entered into the Agreement without the execution of this Principal's Undertaking; and
(b) Without limiting any of Franchisee's obligations under the Agreement, Principal (i) makes all of the covenants, representations, warranties, and agreements set forth in Section 5.L. (Legal Compliance), Section 7. (Confidentiality, Covenants Against Unfair Competition and Solicitation), Section 8. (Use of Marks and Copyrighted Materials), Section 9. (Transfer and Assignment), and Section 14. (Applicable Law; Dispute Resolution) of the Agreement and is obligated to perform thereunder; and (ii) represents that each and every representation of Franchisee made in connection with the Agreement is true, correct, and complete in all respects as of the time given and as of the time of the undersigned's execution of this Principals' Undertaking.
(c) If Principal is an Owner, Principal (i) makes all of the covenants, representations, and warranties set forth in Sections 7.B and 7.D of the Agreement and (ii) represents that each and every representation of Franchisee made in connection with the Agreement is true, correct, and complete in all respects as of the time given and as of the time of the undersigned's execution of this Principals' Undertaking.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the Principal's Undertaking is an agreement that certain individuals connected to the franchisee must sign as a condition for Belocal granting the franchise. These individuals, referred to as 'Principals,' acknowledge they have read the Franchise Agreement and agree that their Undertaking is a partial consideration for Belocal entering into the agreement with the franchisee. Belocal would not enter into the agreement without this signed Undertaking.
The Principal's Undertaking extends specific obligations outlined in the Franchise Agreement to the Principal. These obligations include covenants, representations, warranties, and agreements related to legal compliance, confidentiality, non-competition, use of marks and copyrighted materials, transfer and assignment restrictions, and dispute resolution. The Principal also confirms that all representations made by the franchisee are accurate and complete. If the Principal is an Owner, they also agree to specific covenants, representations, and warranties detailed in particular sections of the Franchise Agreement.
In essence, the 'Undertaking' ensures that key individuals associated with the franchisee are also bound by certain critical terms of the Franchise Agreement. This provides Belocal with added protection and recourse should the franchisee fail to meet its obligations in areas like protecting confidential information or adhering to non-compete clauses. It is a common practice in franchising to have key individuals, especially owners or managers, personally guarantee or undertake certain obligations to ensure the franchisor's interests are protected.