Under the Belocal Principal's Undertaking, what happens if the Principal is not an Owner?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
If Principal is not an Owner, Principal shall not be bound by Sections 7.B and 7.D of the Agreement.
- (d) Principal agrees to jointly, individually, and severally become a surety and guarantor for the payment of all amounts Franchisee must pay under the terms of the Agreement, including under any indemnity.
Principal's liability under this undertaking shall be direct, immediate, and independent of the liability of, and shall be joint and several with, Franchisee and the other guarantors of Franchisee.
Principal shall render any payment or performance required under the Agreement upon demand if Franchisee fails or refuses punctually to do so.
Franchisor may proceed against Principal and Franchisee jointly and severally, or Franchisor may, at its option, proceed against Principal, without having commenced any action or obtained any judgment against Franchisee.
Principal agrees to pay all reasonable attorneys' fees and all costs and other expenses incurred in any collection or attempt to collect amounts due pursuant to this undertaking or any negotiations relative to the obligations hereby guaranteed or in enforcing this undertaking against Principal.
Principal consents and agrees that: (1) Principal's liability will not be contingent or conditioned upon Franchisor's pursuit of any remedies against the Franchisee or any other person; (2) Principal's liability will not be diminished, relieved, or otherwise affected by the Franchisee's insolvency, bankruptcy, or reorganization; the invalidity, illegality, or unenforceability of all or any part of the Agreement; or the amendment or extension of the Agreement with or without notice to the Principal; (3) Principal's liability shall not be diminished, relieved, or otherwise affected by any extension of time, credit, or other indulgence which Franchisor may grant to Franchisee or to any other person, including the acceptance of any partial payment or performance, or the compromise or release of any claims, none of
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, if a Principal is not an Owner, they will not be bound by Sections 7.B and 7.D of the Franchise Agreement. However, the Principal still agrees to act as a surety and guarantor for the payment of all amounts the franchisee owes under the agreement, including any indemnity.
This means that even if the Principal does not have an ownership stake in the Belocal franchise, they are still personally liable for the franchise's financial obligations. The Principal's liability is direct, immediate, and independent of the franchisee's liability, and is joint and several with the franchisee and any other guarantors. Belocal can pursue action against the Principal without first pursuing action against the franchisee.
The Principal must make any payment or performance required under the agreement if the franchisee fails to do so. The Principal also agrees to cover all reasonable attorney's fees and costs associated with collecting amounts due under this undertaking or enforcing it against the Principal. This obligation remains in effect even if the agreement is modified or extended, or if Belocal grants the franchisee extensions of time or credit.
This arrangement protects Belocal by ensuring that there is always a responsible party who is personally liable for the financial obligations of the franchise, regardless of whether they are an owner. Prospective franchisees should carefully consider the implications of the Principal's Undertaking and ensure that any Principal who signs the undertaking fully understands their obligations and potential liabilities.