How does the definition of 'Controlling Ownership Interest' in Camp Margaritaville's Item 1 relate to the Guaranty that must be signed?
Camp_Margaritaville Franchise · 2025 FDDAnswer from 2025 FDD Document
We expect that only business entities, and not individuals, will sign our Franchise Agreement. You must cause the direct and indirect owners (whether they are individuals or business entities) of a Controlling Ownership Interest (defined below) in you which we periodically specify to sign the form of Guaranty and Assumption of Franchisee's Obligations ("Guaranty"). Our current form of Guaranty is attached as Exhibit D to the Franchise Agreement. Under the Guaranty, these owners must personally guaranty all of your obligations under the Franchise Agreement and be personally bound by, and personally liable for the breach of, every provision of the Franchise Agreement, both monetary and non-monetary, including the confidentiality obligations. We may additionally require the spouses of the direct or indirect owners to also sign the Guaranty, based on the circumstances of the particular transaction.
A "Controlling Ownership Interest" in you or one of your owners (if that owner is a legal entity) means, whether directly or indirectly, either: (a) the record or beneficial ownership of, or right to control, 50% or more of the investment capital, equity, rights to receive profits or losses, or other rights to participate in your or the entity's results; or (b) the effective control of the power to direct or cause the direction of your or that entity's management and policies, including a general partnership interest (if the entity is a partnership) and a manager or managing member interest (if the entity is a limited liability company), or the power to appoint or remove any party having these powers. In addition, in the case of (a) or (b), the determination of whether a "Controlling Ownership Interest" exists is made both immediately before and immediately after a proposed transfer.
What This Means (2025 FDD)
According to Camp Margaritaville's 2025 Franchise Disclosure Document, the definition of 'Controlling Ownership Interest' directly impacts who must sign the Guaranty. Camp Margaritaville expects that franchise agreements will be signed by business entities rather than individuals. To ensure accountability, the direct and indirect owners of a 'Controlling Ownership Interest' in the franchisee entity are required to sign a Guaranty. This means that these owners personally guarantee all of the franchisee's obligations under the Franchise Agreement.
A 'Controlling Ownership Interest' is defined as either (a) owning or controlling 50% or more of the investment capital, equity, rights to profits or losses, or other rights to participate in the entity's results, or (b) having the power to direct the entity's management and policies. This includes general partners in a partnership or managing members in a limited liability company. The determination of whether a 'Controlling Ownership Interest' exists is made both before and after any proposed transfer of ownership.
The Guaranty makes these owners personally liable for any breach of the Franchise Agreement, whether it involves monetary obligations or non-monetary obligations, including confidentiality. Camp Margaritaville may also require the spouses of these direct or indirect owners to sign the Guaranty, depending on the specific circumstances. This ensures that Camp Margaritaville has recourse to the personal assets of those who control the franchise, providing an additional layer of security for the franchisor.