What is the role of a Guaranty and Assumption of Obligations in the Big Blue Swim School transfer process?
Big_Blue_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
your creditors or any financial institution. Any security interest that may be created in this Agreement by virtue of Section 9-408 of the Uniform Commercial Code is limited as described in Section 9-408(d) of the Uniform Commercial Code.
17.C. Conditions for Approval of Transfer
If you and your owners are in full compliance with this Agreement, then, subject to this Section 17's other provisions:
We will approve the transfer of a non-controlling ownership interest in you if the proposed transferee and its owners are of good moral character, have no ownership interest
in and do not perform services for (and have no affiliates with an ownership interest in or performing services for) a Competitive Business, otherwise meet our then-applicable standards for non-controlling owners of BIG BLUE Swim School franchisees, sign our then-current form of Guaranty and Assumption of Obligations and pay us a Five Thousand Dollar ($5,000) transfer fee. The term "controlling ownership interest" is defined in Section 22.M.
If the proposed transfer involves the franchise rights granted by this Agreement or a controlling ownership interest in you or in an Entity owning a controlling ownership interest in you, or is one of a series of transfers (regardless of the timeframe over which those transfers take place) in the aggregate transferring the franchise rights granted by this Agreement or a controlling ownership interest in you or in an Entity owning a controlling ownership interest in you, then we will not unreasonably withhold our approval of a proposed transfer meeting all of the following conditions (provided, however, there may be no such transfer until after the School has opened for business):
- (a) on both the date you send us the transfer request and the transfer's proposed effective date: (i) the transferee and its direct and indirect owners have the necessary business experience, aptitude, and financial resources to operate the School, (ii) the transferee otherwise is qualified under our then-existing standards for the approval of new franchisees or of ex
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Big Blue Swim School Franchise Disclosure Document, a Guaranty and Assumption of Obligations is a required document in certain transfer scenarios. Specifically, if a franchisee seeks to transfer a non-controlling ownership interest, the proposed transferee must sign Big Blue Swim School's then-current form of Guaranty and Assumption of Obligations. This indicates that the new owner is agreeing to uphold the responsibilities and financial obligations of the franchise agreement.
Additionally, if a franchisee transfers the franchise agreement to a wholly-owned or affiliated entity, that entity must expressly assume all of the franchisee's obligations under the agreement. However, the original franchisee remains personally liable as if the transfer had not occurred. This suggests that Big Blue Swim School requires both the new entity and the original franchisee to guarantee the obligations, providing an extra layer of security for the franchisor.
Furthermore, in the event of a transfer of franchise rights or a controlling ownership interest, Big Blue Swim School may require the transferee to sign their then-current form of franchise agreement and related documents, including a Guaranty and Assumption of Obligations. The terms of this new agreement may differ significantly from the original agreement. This ensures that the new franchisee is bound by the most up-to-date terms and conditions set by Big Blue Swim School.
In summary, the Guaranty and Assumption of Obligations serves to ensure that all parties involved in a transfer—whether it be a non-controlling owner, a wholly-owned entity, or a new franchisee—are legally bound to fulfill the obligations of the franchise agreement. This protects Big Blue Swim School's interests and maintains the integrity of the franchise system.