What are the consequences if Owners of a Brueggers Bagels franchise fail to personally guarantee the franchisee's obligations?
Brueggers_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee is a corporation, partnership, or limited liability company, the owner(s) of Franchisee identified on Exhibit A to this Agreement must execute our standard form of Guaranty.
The Franchise Agreement requires persons with legal or beneficial ownership interests in Franchisee to be personally bound by Franchisee's obligations under the Franchise Agreement, including restrictions on competition, confidentiality obligations, restrictions on ownership changes, and dispute resolution provisions.
You acknowledge and agree that: (a) your execution of this Agreement is a condition of acquiring and holding your ownership interest in the Franchisee, and (b) you have received good and valuable consideration for executing this Agreement.
BFC may enforce this Agreement directly against you.
If a business entity signs this Agreement, all persons who have a legal or beneficial ownership interest in that business entity must also execute this Agreement and if your owners reside in a community property state we may require their spouse to execute this Confidentiality and Non-Competition Agreement.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD page 48)
What This Means (2025 FDD)
According to the 2025 FDD, if the franchisee for a Brueggers Bagels location is a corporation, partnership, or limited liability company, the owner(s) identified on Exhibit A of the Franchise Agreement must execute the standard form of Guaranty. The Franchise Agreement also requires individuals with legal or beneficial ownership interests in the franchisee to be personally bound by the franchisee's obligations. These obligations include restrictions on competition, confidentiality obligations, restrictions on ownership changes, and dispute resolution provisions.
This requirement ensures that Brueggers Bagels can hold the owners of the franchisee personally liable for the business's debts and obligations. This is a common practice in franchising, as it provides the franchisor with an additional layer of security and encourages the owners to actively manage and oversee the franchise. By signing the Guaranty, the owners agree to be individually bound by the franchisee's covenants, obligations, and promises outlined in the Franchise Agreement.
Furthermore, the FDD states that the execution of the agreement to be personally bound is a condition of acquiring and holding ownership interest in the franchisee. Brueggers Bagels can directly enforce this agreement against the owners. If a business entity signs the agreement, all individuals with a legal or beneficial ownership interest in that entity must also execute the agreement. In community property states, the spouses of the owners may also be required to sign a Confidentiality and Non-Competition Agreement. Therefore, failure to personally guarantee the franchisee's obligations would prevent the owners from acquiring or maintaining their ownership interest in the Brueggers Bagels franchise.