What must all persons who own any interest in the franchisee entity do regarding the Buona franchise agreement?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
Prior to the opening of the Franchised Business, any individual signing as franchisee shall establish a corporation, limited liability company, general partnership or limited partnership ("Entity"), to own and operate the Franchised Business and shall assign this Agreement to the Entity. Franchisee's owners, shareholders, officers, directors, members, managers and partners (or persons holding comparable positions in non-corporate entities) shall be referred to herein as "Principals". Franchisee must complete and update throughout the Term, as necessary, the "Statement of Ownership" attached as Exhibit D, and:
- (a) All persons who own any interest in the Entity must guaranty Franchisee's performance under this Agreement by signing the "Guaranty and Assumption of Franchisee's Obligations" attached as Exhibit E;
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, if the franchisee is a corporation, limited liability company, general partnership, or limited partnership, all individuals who own any interest in that entity must guarantee the franchisee's performance under the Franchise Agreement. This is done by signing a "Guaranty and Assumption of Franchisee's Obligations," which is attached as Exhibit E to the Franchise Agreement.
This requirement means that anyone with an ownership stake in the franchisee entity is personally responsible for ensuring the franchisee complies with all terms of the Franchise Agreement. This includes financial obligations, operational standards, and adherence to Buona's brand guidelines. The personal guaranty effectively extends the franchisee's obligations to the individual owners, making their personal assets potentially liable if the franchisee fails to meet its obligations.
This is a fairly standard practice in franchising, as franchisors often seek to ensure that individuals with a vested interest in the business are fully committed to its success and compliance. By requiring a personal guaranty, Buona aims to mitigate the risk of non-compliance and protect its brand and reputation. Prospective franchisees should carefully review Exhibit E and understand the full extent of their personal obligations before signing the Franchise Agreement.
It is important for potential Buona franchisees to consult with legal and financial advisors to fully understand the implications of providing a personal guaranty. They should assess their personal financial situation and risk tolerance before committing to the franchise. Franchisees should also ensure they have a clear understanding of the Franchise Agreement and the obligations they are guaranteeing.