Is the Guarantor's liability coextensive with that of the Franchisee for a Buns On Fire franchise?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee is an individual, Franchisor hereby consents, upon thirty (30) days' prior written notice, to the assignment by Franchisee of all of the Franchisee's rights and benefits under this Agreement to a corporation or limited liability company of which Franchisee owns at least a majority of the voting and equity stock or membership interests, provided that:
- (i.) Such entity is newly organized, and its activities and corporate purposes are confined exclusively to acting as a Buns on Fire franchise under this Agreement;
- (ii.) Such entity and all stockholders or members thereof execute a Transfer of Franchise to a Corporation or Limited Liability Company form, or such other form as shall be provided or approved by Franchisor, in which they jointly and severally assume all of the past and future obligations of Franchisee under this Agreement, to the same extent as if they had originally executed this Agreement as Franchisee;
- (iii.) Franchisee or Franchisee's designated manager actively manages such entity and continues to devote his/her best efforts and full and exclusive time to the day-to-day operation and development of the franchise and the business of the Franchised Business and Franchisee shall remain personally liable in all respects under this Agreement, including but not limited to payment for the purchase of any of the Products, jointly and severally with such entity and any and all other stockholders or members thereof; and
- (iv.) All certificates of such entity bear the following legend, which shall be printed legibly and conspicuously on the front of each such certificate:
"The transfer of this certificate is subject to the terms and conditions of a certain Franchise Agreement entered into with SMYA Ventures LLC, dated , 20 ".
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, if a Buns On Fire franchisee is an individual and seeks to transfer their rights to a corporation or limited liability company, the guarantor's liability is addressed.
Specifically, if the franchisee wants to assign their rights to a corporation or LLC where they own a majority stake, the new entity and all its stockholders or members must jointly and severally assume all past and future obligations of the franchisee. This assumption must be to the same extent as if they had originally signed the Franchise Agreement.
Furthermore, the original franchisee remains personally liable in all respects under the agreement. This includes, but is not limited to, payment for products, jointly and severally with the new entity and its stockholders or members. This means that the original franchisee's liability continues even after the transfer to the corporation or LLC, ensuring that the franchisor has recourse to the original franchisee's assets if the new entity fails to meet its obligations. This is a common practice in franchising to ensure the continued performance of the franchise agreement even if the business structure changes.