What agreement is entered into when a Bumper Man franchisee forms a franchise entity?
Bumper_Man Franchise · 2025 FDDAnswer from 2025 FDD Document
A franchise applicant may be an individual, corporation, partnership, or other form of legal entity. However, if a franchisee applicant is an individual, we recommend you form a legal business entity to act as franchisee. Such individual franchisee applicant must have the sole authority to direct the day-to-day operations of the Bumper Business and hold majority voting rights ("Controlling Interest") in the franchisee entity. When you form the franchise entity, you and we will enter into a transfer agreement for the convenience of ownership transferring ownership of the franchise to the franchisee entity and you will be required to personally guaranty the obligations of the franchise entity.
Source: Item 1 — THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES (FDD pages 8–11)
What This Means (2025 FDD)
According to the 2025 Bumper Man Franchise Disclosure Document, if a franchisee applicant is an individual, Bumper Man recommends forming a legal business entity to act as the franchisee. When the franchisee forms the franchise entity, Bumper Man and the franchisee will enter into a transfer agreement. This agreement facilitates the transfer of ownership of the franchise to the franchisee's newly formed entity.
An important condition of this transfer is that the individual franchisee must personally guarantee the obligations of the franchise entity. This means that even though the business is operating under a corporate structure, the individual franchisee remains personally liable for the financial and contractual obligations of the Bumper Man franchise.
This arrangement is fairly common in franchising, as it provides an added layer of security for the franchisor. By requiring a personal guarantee, Bumper Man ensures that the individual franchisee has a direct stake in the success of the business and is more likely to uphold the terms of the franchise agreement. Prospective franchisees should carefully consider the implications of providing a personal guarantee, as it could expose their personal assets to risk if the franchise entity fails to meet its obligations.