Under the Camp Margaritaville Guaranty, what obligations of the Franchise Agreement are the owners personally bound by?
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.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 62–63)
What This Means (2025 FDD)
According to Camp Margaritaville's 2025 Franchise Disclosure Document, the franchisor expects that only business entities, and not individuals, will sign the Franchise Agreement. However, the direct and indirect owners of a Controlling Ownership Interest must sign a Guaranty. A Controlling Ownership Interest means ownership or control of 50% or more of the investment capital, equity, rights to profits or losses, or the power to direct management and policies.
Under the Guaranty, these owners must personally guarantee all of the franchisee's obligations under the Franchise Agreement. This means they are personally bound by, and personally liable for any breaches of the Franchise Agreement. This includes both monetary and non-monetary obligations, such as confidentiality.
Camp Margaritaville may also require the spouses of the direct or indirect owners to sign the Guaranty, depending on the specific circumstances. This ensures that the franchisor has recourse to the personal assets of the owners and potentially their spouses in case of default or breach of contract by the franchisee. This is a fairly standard practice in franchising, as it provides the franchisor with an additional layer of security and encourages the owners to actively manage the franchise in accordance with the agreement.