Does Body20 require all owners identified in Appendix A to execute a Payment and Performance Guarantee, and is this a condition of entering into the franchise agreement?
Body20 Franchise · 2025 FDDAnswer from 2025 FDD Document
our Designated Manager is not required to have an ownership interest in your Entity. Your Operating Principal and Designated Manager (if known at the time of signing) shall be listed in Appendix A. You must provide us with written notice of your Operating Principal and Designated Manager(s) at least 60 days prior to opening and may not change your Operating Principal and Designated Manager without our prior written approval.
1.5 Ownership and Guarantee.
- (a) Owners of Equity. If you are an Entity, each of your Owners and their spouses must execute the "Payment and Performance Guarantee" that is attached in Appendix C (the "Guarantee"). By executing the Guarantee, each Owner will be bound by the provisions contained in this Agreement, including without limitation the restrictions set forth in Section 12 (Noncompete Covenants). Further, a violation of any of the provisions of this Agreement, including the covenants contained in Section 12, by any Owner or Owner's spouse will also constitute a violation by you of your obligations under this Agreement.
- (b) Governing Documents. If you are (or Transfer this Agreement to) an Entity, upon our request, you agree to furnish us with a list of holders of direct or indirect equity interests and their percentage interests, as well as copies of your governing documents and any other corporate documents, books, or records, including certificates of good standing from your state. The Owners may not enter into any shareholders' agreement, management or operating agreement, voting trust, or other arrangement that gives a third party the power to direct and control your affairs without our prior written consent. During the Term, your governing documents must provide that no transfer of any ownership interest may be made, except in accordance with Section 13 (Transfer and Assignment) of this Agreement. Any securities that you issue must bear a conspicuous printed legend to that effect.
**Section 2 Initial Term and Successor Term.
Source: Item 23 — RECEIPT (FDD pages 74–251)
What This Means (2025 FDD)
According to Body20's 2025 Franchise Disclosure Document, if the franchisee is an entity, Body20 requires all owners listed in Appendix A to execute a Payment and Performance Guarantee. This requirement is explicitly stated as a condition for Body20 entering into the franchise agreement. This guarantee is attached as Appendix C to the franchise agreement.
The Payment and Performance Guarantee ensures that the owners of the franchisee entity are personally liable for the franchisee's obligations under the Franchise Agreement. This means that if the Body20 franchise fails to meet its financial or operational obligations, Body20 can seek recourse directly from the owners. The owners also agree that they have reviewed a copy of the Franchise Agreement and have had the opportunity to consult with counsel to understand the meaning and import of the Franchise Agreement and this Guarantee.
This requirement is a standard practice in franchising, as it provides the franchisor with additional security and recourse in case of franchisee default. Prospective Body20 franchisees should carefully review the Payment and Performance Guarantee and understand the full extent of their personal liability before signing the Franchise Agreement. Franchisees should also be aware that a violation of any of the provisions of the Agreement, including the covenants contained in Section 12, by any Owner or Owner's spouse will also constitute a violation by you of your obligations under this Agreement.