What obligations do the Principals of the entity executing the Caring Transitions franchise agreement have?

According to Caring Transitions' 2025 Franchise Disclosure Document, if a franchisee is a limited liability business entity, each principal owner must execute a separate agreement. This agreement, in a form prescribed by Caring Transitions, unconditionally guarantees the full payment of the franchisee's obligations under the franchise agreement. Additionally, the principals agree to be jointly and severally bound by all the provisions of the agreement, including the Covenants After Termination.

This requirement ensures that Caring Transitions has recourse to the personal assets of the principals should the franchisee entity fail to meet its financial or other obligations. The joint and several liability means that each principal is liable for the entire debt or obligation, not just a portion. This is a common practice in franchising to provide the franchisor with added security.

Furthermore, if the franchisee is not a limited liability business entity when initially signing the agreement, they have 90 days to transfer all interests and obligations to such an entity. In this case, the individuals who originally signed the agreement must maintain a controlling interest in the limited liability entity, with one of them acting as the principal executive and operating officer. This ensures continuity of management and responsibility.

Caring Transitions also requires that the limited liability entity's activities are confined exclusively to operating one or more Caring Transitions franchises. The entity's organizational documents must prescribe a maximum of ten Principals and prohibit the issuance or transfer of ownership interests except in compliance with the franchise agreement. Franchisees must provide Caring Transitions with an updated list of principals upon request or after any change in the information on the Principal List. These stipulations ensure that Caring Transitions maintains control over who is involved in the franchise and that the franchise's operations remain focused.